South Strategy

Taking a chance

Vikas Sharma, GM of The Chancery Pavilion, speaks of making the most of market conditions in the given circumstance. By Neeti Mehra

The markets in Bengaluru have faced a double whammy - the recession as well as restrictive western policies impacting the fortunes of the IT/ITeS business. Consequently, the first quarter has been difficult for the industry. Says Vikas Sharma, GM of The Chancery Pavilion, "Our hotels fared reasonably well in the poorly performing months of January and February, posting RevPAR index increases in each of those two months." The main party pooper has been the slump in the IT/ITeS industry that's affected a whopping 35-40 per cent of the business. Price wars have intensified, he reveals, with discounts resulting in a relatively flat RevPAR Index for the quarter. With such figures to contend with, what lies ahead?

Strict cost controls have led to an improvement in revenues, he says. "In the first quarter, our F&B margins have been stable and extremely healthy. We have renegotiated pricing for the rooms division with numerous vendors at both the corporate and property levels, he says, of a confrontational strategy that is beginning to pay off. "ARRs are hovering around the Rs 7,000- 7,500 mark in the five-star business hotels segments, while in the luxury segment it ranges between Rs 10,000 and Rs 11,500," he says.

Is there scope for further corrections? Sharma doesn't see any scope for that, given the existing inventory levels. "However, with the addition of larger inventories in the near future as well as the concept of serviced apartments catching up in the medium to long term, there is bound to be a further 10-15 per cent rate rationalisation." This will happen soon enough owing to the changing hospitality landscape. "There are at least five new hotels which have opened up in the past year in the four-five star segment and a lot more in the pipeline," he says, with brands such as the Ritz-Carlton, Movenpick, Shangri-La, Four Seasons, all lined up to open their doors within two years.

The Chancery Pavilion way

Speaking of aligning business strategies to the top-line performance of the brand, he says, "One needs to draw a clear line between cost reduction and cost management. We have been very clear that we will not reduce costs by sacrificing on the qualitative aspect of our products," he says of its strategy to 'manage costs'. He mentions the benefit of a contingency plan as well as shedding flab, with the management taking the lead, while factoring flexibility for employee suggestions. Two areas it is not willing to cut down on are the sales effort and guest contact areas.

Explaining its HR strategy, the company has frozen salary increments and is recruiting on need basis. "Key positions and technical skilled areas are priority for us and we have taken this is a clear-cut policy decision and have not put recruitments on hold," he explains.

How has the recession impacted its spends? Speaking of its two-pronged approach for FFE, says Sharma of expenditure on equipment used in guest contact areas, "We are not compromising on quality and are looking at state-of-the-art equipment keeping in line with our image." The Chancery Pavilion is also investing in equipment manufactured in India, which in quality matches to international standards and is easily serviceable, and does not directly come in guest contact.

Technology is another area it is investing in to improve efficiencies such as WINHMS, IBM Lotus Notes, thumb impression Attendance Management System, to name a few. "We are also in the process of upgrading our website to international levels where the company has invested liberally,” he adds.

The way ahead

Sharma sees great potential in MICE in the future, ruing the fact that abysmal infrastructure and the lack of international standard convention centres has impacted the market. "However there have been some great initiatives such as 'Conventions India' started by the Indian Conventions Promotion Bureau and as a result MICE could be one of the potential revenue channels for hotels in the years ahead.

Another revenue generating idea is health and wellness retail. "We are in the process of venturing into the spa retail line," says Sharma, adding that currently, 63 per cent of their revenues are contributed by rooms, 33 per cent by F&B and four per cent from miscellaneous income and this alternative revenue stream could prove to be a money spinner.

Also, The Chancery Pavilion will tap the medical tourism market. The company, for its own part, does not plan to venture into alternate hospitality ventures. He says, "We as a company are planning to expand our four-star brand The Chancery to II and III tier cities, such as Vizag, Ahmedabad, as well as Chennai in the next few years," he says. Also on the pipeline are plans to venture into newer tourist destinations within Karnataka with boutique resorts and also build up a stronger regional presence.

Speaking of governmental initiatives, the leaders of the travel and tourism industry have come together on a common platform - the Karnataka Tourism Forum - to make the state a leading tourist destination for both business and leisure travellers. "Meetings are actively attended by various top secretaries from the government of Karnataka and the Government of India. The Principal Secretary (Tourism), Government of Karnataka - Jyothi Ramalingam has been a pillar of strength for this forum," he says.