Cost-cutting, wooing with discounts go in tandem

Nivedita Ganguly Mumbai | Updated on November 24, 2017


The hospitality industry is battling the effects of a reduced GDP growth, plummeting rupee and increased economic and political uncertainty.

Budget hotel chain Ginger’s Managing Director P. K. Mohankumar is on a cost-cutting drive these days. One of the things he has done is deploy design-led construction concept for easy maintenance with minimalist design.

“In design-led constructions, the interiors are designed in such a way that it is dust-proof. This reduces at least two hours of cleaning,” Mohankumar says. To start with, Ginger has implemented this design in its hotel in Mumbai.

“If you have to market a room at Rs 1,600 like we do, you have to be a completely cost-driven brand. Every rupee spent is accounted for. We are creating a culture of cost management in the system,” Mohankumar says. In addition to cost-cutting in payroll, energy conservation and getting the right source of funding, Ginger has also increased use of mill-made products. Mill-made products are fixed furniture such as wall cupboards, which are produced large-scale at lower costs.

Travel costs

“We are also cutting down on employee travel costs. I recently told my sales manager when he was going to Eastern India to not just visit Bhubaneshwar and Jamshedpur, but also to go to Guwahati and Agartala in the same trip. And we are consciously cutting down the costs for travel by opting for train instead of flights. This is a new culture and I call it smart travelling,” Mohankumar added.

Big discounts

At a time when the hospitality industry is battling the effects of reduced GDP growth, plummeting rupee and higher economic and political uncertainty, it’s not only budget hotels that are feeling the impact. Five-star hotels such as the Mumbai’s Trident are offering big discounts to attract business clients.

For example, an executive suite with a magnificent view of the Arabian Sea from the 31st floor is now being offered at Rs 18,000 per night, almost 70 per cent less than the rack rate of Rs 65,000. To sweeten the deal, the hotel has also thrown in complementary airport transfers in an Audi A8 sedan.

Taj Group of Hotels, for example, has launched the ‘Suite Celebrations’ package that provides a host of additional privileges, including exclusive flexible check-in and check-out to speedy transfers from the airport to the hotel, lavish breakfasts and evening cocktails and access to fully-equipped fitness centre with steam, sauna and Jacuzzi facilities. The offer is valid across Taj properties starting from Rs 15,000 onwards. Under normal circumstances, the rack rates for an executive suite a day are Rs 38,200 onwards.

As corporates cut down on travel and consumers postpone their holidays, the hotel industry’s revenue is hit. According to a report by HVS Global Hospitality Services, the nationwide RevPAR (revenue per available room) recorded a 5.2 per cent drop in the hospitality sector in 2012-13 over the previous year, with the five-star hotel segment registering the maximum decline (8.7 per cent), followed by the three-star segment (4.0 per cent).

Special offers

Therefore, hotels are coming up with special offers especially for alternative segments. Leela Goa and Udaipur, for instance, is eyeing the lucrative wedding market to shore up revenues.

Shridhar Nair, General Manager, The Leela Goa, said, “Though the global slowdown has definitely affected the tourism industry in Goa as well, we have been working on exploring alternate markets to grow our business and this includes the wedding segment. As of now, our strategy (to focus on wedding segment) on this front has worked well in countering the slowdown.” The wedding segment currently contributes to around 15 per cent of the overall hotel revenues and Nair is hoping to achieve around 15 per cent growth in this segment. The Leela Palace Udaipur is attracting the MICE (Meetings, Incentives, Conferences, Exhibitions) segment with value-adds such as Wi-fi discounts, complementary meeting rooms, banquet bottle rates on liquor and airport transfers.

Telangana issue

India-based hotel chain Sarovar Hotels has found a way to keep costs lower even as it has 20 new projects in the pipeline.

Sarovar has given the projects on management contract, wherein the developer builds the hotel and the hotel chain runs it for a management fee. Ajay Bakaya, Executive Director, Sarovar Hotels, says, “The effect of the slowdown has been more pronounced in Hyderabad. Our hotels are seeing occupancy levels of 50 per cent here. Excess supply and partial impact of the Telangana issue are responsible for this,” he said.

Like other companies, Sarovar is also focusing on cutting down on pay-roll costs and energy conservation.

“We are going slow on hiring at the moment and not replacing attritions. Energy conservation is another area where we have fine guidelines. We are using LED lights now and solar energy for heating and other purposes,” he said. Bakaya expects the situation to continue for another year.

“We expect the situation to stabilise two to three months after the general elections next year,” he added.

This is the seventh part of a series on how companies in various sectors are coping with the slowdown

Published on September 08, 2013

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