‘In India, mid-market hotels need to keep a very close watch on operating costs’

The US-based Choice Hotels International plans to strengthen its presence in India. Vilas Pawar, Chief Executive Officer of the Nasdaq-listed hotel chain talks to Business Line about future plans and how mid-market hotels are trying to control operating costs. Excerpts:

What innovations are mid-segment hotels doing to gain customers?

Mid-market hotels today offer almost the same services to their guests as the luxury hotels, minus the grandeur and space which is a given with the luxury hotels. The hotels have also begun innovative ways to control operating costs — by multi-tasking, effective control on energy costs, maintaining staff to rooms ratio to control HR costs, offering customers what they are looking for and doing away with “frills”. These factors have ensured better returns for the promoters on their investments, without compromising (on) the guest experience.

How are mid-segment hotels shaping up in tier I and II cities?

The mid-market hotels have tremendous potential in both tier I and II cities. However, the return on investment (ROI) for these hotels are better in tier II cities given the real estate cost compared with tier I cities.

Mid market hotels offer the full spectrum of services at an affordable price point, and hence are gaining, and would continue to gain popularity in a value conscious market such as India.

What is the demand-supply position for mid-segment hotels ?

The demand for mid-market hotels is only increasing but unfortunately, there is a shortage of supply in this segment of hotels across India.

What are the challenges they face in India?

The mid market hotels need to keep a very close watch on expenses, especially related to construction at the project stage.

They need to ensure efficient design and control operating costs once the hotel is in operation.

One needs to carry out the feasibility of putting up a hotel keeping the real estate cost in mind. Another challenge is, a lot of promoters are not involving professional service providers and architects while planning hotels in the mid market space, which only leads to pressure on operations once the hotel opens, and thereby compromising on profitability.

What has been Choice Hotels’ approach ?

We have been in India for over 20 years, as the leaders in the mid market segment of hotels.

We presently have 26 hotels operating in the country. We would be adding three to four hotels by end of this year. Additionally, we have eight hotels in various stages of development, (and) they are due to open in the next two to three years.

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