The budget hotel segment in India is witnessing a lot of buzz. Sensing the demand, both home-bred and international hospitality players are launching their brands in the budget category. Early starter Ginger Hotels, the Tata Group?s budget brand, is also gearing up for rapid expansion. It recently started commercial operations at its 25th property at Faridabad in the national capital region. Prabhat Pani, CEO of Roots Corporation that owns and runs Ginger Hotels, spoke to FE?s Vishakha Talreja Guha about the company?s expansion plans. Roots Corporation, a subsidiary of the Indian Hotels Company that runs the Taj group of hotels, last year sealed a deal with Singapore-based private equity firm Omega TC Holdings to raise R150 crore by selling a minority stake. Edited excerpts:
What are Ginger Hotels? expansion plans? What are your investment targets?
In the next three to four years we will be adding 55 new hotels, to our existing kitty of 25 hotels. This fiscal we will be opening seven new properties. Majority of these hotels will be owned by us, so we will be investing in them too.
Typically cost per key at our hotels is R16-17 lakh, which includes other costs such as security, fire fighting systems, lobby, etc. On an average each hotel has about 100 rooms. So, that?s the kind of investment we are looking at. Properties are already under construction at Noida, Greater Noida, Chandigarh, Amritsar and Jaipur, to name a few. Investment is not an issue for us as we have decent funding and minimal debt.
What has been the impact of the current slowdown on your business?
The 2008-09 slowdown actually proved beneficial for us because we are in the budget category. Similarly, during this downturn, we are seeing that many more organisations and companies are interested in putting up their employees at our hotels as it helps them save costs. Though in India the economy or budget segment of hotels is relatively new, global markets have proved that during recession this segment gains as corporates and leisure travellers cut travel budgets.
There are many hotels on the block. Are you looking at acquisitions for rapid expansion?
We are open to acquisitions as long as it meets the standards of the Ginger model. There are many things such as the room to total area ratio that we have to see when acquiring a property. For instance, the Rail Yatri Niwas that was converted into Ginger Hotel, under PPP model, worked for us. But even then we had to redo that property.
Are you looking at entering into management contracts also?
Of the seven-eight hotels that we have under construction currently, only one is a management contract. We first identify a location where we want to be present and look at the option of owning or leasing a property. If that doesn?t work out, only then we look at a management contract. Therefore, in future also only few properties will be the ones that we manage for a fee.
There are international budget brands that are launching in India market like Formule 1 and Holiday Inn Express. How do you see competition in this space?
We have an edge being an Indian brand. We also have a parentage that is 100 years old. But there is definitely a space for all the brands. According to WTTC, domestic travel in India will grow by two and a half times. It?s this demand that budget hotels will cater to.