If one is not sure about what thinking ‘out-of-the-box’ means in business parlance, one has to just meet hotelier Patu Keswani. For starters, his hotel brand name, Lemon Tree, itself was a break from the usual. Then there were the much-talked about ponytails with yellow bows that the senior management of the hotel group sported, and well, if that wasn’t quirky enough, they even have dogs on board! ?Twenty five dogs in 11 cities,? says Keswani in a tone in which one would mention employee count.
Flamboyant and slick, Patu Keswani, who has worked for 15 years with the Taj Group of Hotels and also with consulting firm AT Kearney earlier, makes for a picture-perfect hotel entrepreneur. He says hotel business is about three things?asset creation, management business and brand development.
?In India the challenge really lies in creating the asset. I wanted to develop my own brand, which meant building hotels as per our specification. So I did it all?acquiring land, building hotels, getting a project management team, getting government approvals, running hotels, fighting with the old players and beating them,? he says. That?s the Lemon Tree summary straight from the horse’s mouth.
The mid-market hotel company, which opened its first hotel in Gurgaon in 2004, today has 14 hotels in 12 cities. Patu, 50 years’ old now, started the company with the help of over 40 friends, who chipped in with the money. ?There was a gap between the five-star and non-branded budget hotel space, which I wanted to fill,? he reasons. Though in the beginning Lemon Tree hotels was budget-priced accommodation, he had to upscale the brand positioning soon as he was targeting those who essentially stay at five stars. Later he realised the need to have an out-and-out budget brand and launched another brand, Red Fox, with its first property opening doors only last year.
The group’s fast expansion was attractive enough to catch the attention of PE players. In 2006, PE major Warburg Pincus infused Rs 210 crore in the company. In 2008, Shinsei Bank Ltd and Kotak Realty Funds jointly invested $30 million in the company for an equity stake of 5.9%, valuing Lemon Tree Hotels at over $500 million.
Lemon Tree?s model is a low-cost one and Keswani has done his maths. ?We charge half of what five star hotels do, but we ensure that our occupancy is one and a half times of the city’s average occupancy. We thrive on volumes,? he says. The hotel company, with it?s two brands, Lemon Tree and Red Fox, will clock an annual turnover of around Rs 200 crore this fiscal. It will have 26 hotels in 16 cities between the two brands by 2012, and that?s the year when it plans to go for an IPO. Fast expansion, yes, but for now, this hotelier is sure he doesn?t want to expand overseas and the luxury space is not for him.
There is not a dull moment with Patu; his business ideas are straight but interesting. For his hotel business, he says ?customer stickiness? and ?guests stickiness? are important. And he is high on both?while the six-year-old company has 40% of its guests who are repeat customers, low attrition rate means his employees are definitely sticking around. ?I never meet my guests. But I meet my employees and keep them happy. They, in turn, keep customers happy,? he states with a contagious smile.
Esops is one of the ways Keswani has employed to keep his employees happy. That?s not all to his people policy. He strongly believes in being inclusive, giving job opportunities to the not-so-privileged. Around 5% of the company?s employees are deaf and mute, and are involved in back-end jobs.
His story might be inspiring, but Keswani points out that for hotel entrepreneurs, exorbitant land prices and the opaque process of government approvals are entry barriers, the reasons why India is grappling with hotel room shortage and very few hotel entrepreneurs.
