The Hindu Business Line : Will indiWin?

INDIAN Hotels has decided to change the price-performance equation in the hotels industry. Creating a new approach to hospitality, the company has floated a wholly-owned subsidiary named Roots Corporation Ltd to launch a separate category under `Smart Basics' hotels within the budget hotels concept by the name indiOne. This is not the first attempt by Indian Hotels to enter the budget hotels category but this time it has managed to break the price barrier at a tariff starting below Rs 1,000.

Roping in renowned corporate strategy thinker Dr C. K. Prahalad indiOne hotels have been designed to be functional, comfortable, clean and safe, all at an affordable rate. Claiming much innovation and cost efficiency, its business model is based on gaining critical mass to become quickly profitable.

Devoid of the Taj tag, indiOne is a standalone brand which is being set up as a new project. While it has already launched its first property at Whitefield near Bangalore, there are plans launch the brand at nearly 150 destinations.

Positioning the brand as a `people's hotel', Raymond N. Bickson, Managing Director, Indian Hotels Company, says, "This unique value hotel brand of ours is cool, connected and contemporary to suit today's travellers. We are offering a complex promise since we have to offer consumer value and at the same time keep track of the company's profitability."

In fact, apart from the pricing, there seems to be nothing in common with what the existing budget hotels have to offer. Sample some of its `unique value' facilities. From wall-mounted 17-inch flat televisions (sourced from Samsung) in every room, there are the usual five-star trappings such as superior electronic door locks, mini-fridge, tea/coffee maker, ATMs, World Space radio in the public areas and closed circuit television.

Sheila Nair, COO, Roots Corporation

Claims Sheila Nair, Chief Operating Officer, Roots Corporation Ltd, "Apart from the pricing, there is nothing else that is common with respect to the décor and the technology in the existing low-priced hotels. We have basically reconfigured the Smart Basic hotels concept."

Dr Prahalad's role in reinventing the budget concept with the `Smart Basics' approach has been instrumental to building the indiOne brand. He has helped in making radical changes in the operations of the hotel ranging from IT to HR systems. Explains Nair, "Dr Prahalad has been the co-creator of the project. He has used his experience to radically innovate and make a holistic brand folding in areas such as IT and market research. He has, in fact, planned for the future and made it a futuristic concept."

Ensuring the same quality standards across the future chain of hotels, the indiOne brand is expected to avoid the franchisee route. "These are formula-built products and will be built ground up. There is no chance of taking over existing hotels. Although we have not completely ruled out the franchise system, at the moment the model is not open to franchisees," says Nair.

Earmarking Rs 10 crore for every location, the price of acquiring land will also play a crucial role in how fast it manages to ramp up its operations. Getting land at the suitable price will be imperative to bringing down the cost of its projects. Observes Navjit Ahluwalia, Associate Director, HVS International, an international hotel consultancy, "While it cannot control construction costs, the trick would be to acquire land at a low cost. This should be possible in the smaller places. The success of the project will depend on how fast it manages to ramp up its operations."

In the urban markets, indiOne would be targeting locations near railway stations, bus junctions, airports, industrial parks and technology parks, export promotion zones, business districts and suburbs. In the leisure destinations, it could be visible in places such as pilgrim and cultural centres, hill stations, beach resorts and trekking and wildlife centres.

IndiOne also has plans of expanding its operations to regions such as Africa, West Asia and China. "These are countries which have similar demographics compared to India and there is a potential business model there," says Bickson.

Not restricting its clientele to the average business traveller who is looking for a no-frills hotel, indiOne has segmented its potential clientele depending on age (young and old), income (low and high), profession (educated and self-employed), gender (men, women and families) and even overseas visitors, apart from the usual business and leisure tourist.

According to Bickson, "The brand is targeting the emerging Indian." The company describes the emerging Indian as one who has global standards and is innovative, self-confident and forward-looking.

The indiOne brand has a target of setting up its operations in 150 locations within the next 3-5 years. With a `robust' business model, as Nair describes it, the company, she claims has been cash-positive from day one. Says she, "We already have a robust model and profits will depend on how we manage our costs and deals."

Doing away with discount and commissions, indiOne has multilevel distribution channels. It also offers its consumers online bookings through the Net. Besides, it has engaged in partnerships with corporates such as ICICI (for ATMs) and Tata Tetley (for tea and coffee supplies) and expects to forge more of such co-branding deals with its own brand.

While indiOne is yet to use the mass media for advertising, chlorophyll, the brand consultancy, has been appointed to build the brand. chlorophyll's current assignment is to develop direct marketing initiatives to reach out to the target market, apart from designing logos and signages within the hotel.

Breaking even in the operations will not happen quickly unless the brand expands fast. While break-even periods will vary with respect to every property depending on its location and occupancy, Indian Hotels is not relying on this project as a growth vehicle.

"Among all our projects, indiOne is just one vehicle of growth. We are expecting growth from many other segments as well, such as the spas and resorts and also our luxury residences," claims Bickson.

Hedging its risks, the leading hotel chain does not want to derive growth from a single project, which nevertheless could help in generating the necessary volumes. For instance, it has already planned luxury hotels in China and South-East Asian countries. Besides, it has just opened the doors of its luxury apartments (Taj Wellington Mews) and made a foray into the serviced luxury residences category in Mumbai.

However, the immediate challenge for Indian Hotels will be to scale up the volumes for its indiOne brand. As hotel consultant Ahluwalia observes, "It is going to be a difficult execution. The gestation period for such a project is going to be slow. Only a large group such as Tata can afford to do it. As long as it can maintain efficiencies in its operations, there will be profits down the line as there will be an explosion in the demand for such hotels."

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