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How the success of budget hotel brands is changing Indian hospitality

Aditya Sanghi
4th Feb 2016
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Over the past few years, hospitality in India has seen the budget-hotel segment grow and make its mark on the industry. The entry of OYO Rooms has been a game-changer, giving birth to a whole new industry, and organising properties within this segment. This has helped highlight the value of independently run hotel businesses. Never before has the country’s hospitality industry witnessed such a surge in the growth of these ‘budget brands’.

It is the sudden influx of these ‘budget brands’ that has ignited the growth of this sector, fuelled by the drastic, almost unrealistic pricing that they have introduced. Domestic tourism has especially benefitted from this and has been growing steadily from 2014, with the number of trips increasing by 12 per cent. India is beginning to witness an increasing interest in internal tourism, as a younger generation of travellers begin to dictate trends in the country. This is a direct consequence of the growth of smaller segments and businesses within hospitality.

Image: Shutterstock
Image: Shutterstock

 

While the impact that these businesses have had on the industry is impressive, this is just the beginning, and well begun is still only half done. To take their business to the next level, these brands need to implement stringent quality standards and focus on the guest experience.

These brands today have a lot in common with the dedicated aggregators; in fact, MakeMyTrip has gone the extra mile, creating a dedicated Value+ category to go head-to-head with these new age-brands. In the case of aggregators like Best Western or Choice, the properties carry a signature of their branding – making it necessary to maintain the quality of experience guaranteed by this branding. Prioritising this guest experience becomes a critical component of this model.

The guest’s journey actually begins the moment he or she starts looking for a room, and doesn’t end until post-checkout. The hotel will need to ensure that this experience remains consistent and meets all the expectations set by the brand. As of today, there are a number of technical difficulties scattered throughout the booking process, from which problems can arise at any point.

Finding a Solution

Veterans like Best Western have invested a significant amount of time and money into monitoring and performing in-depth audits on brand standards and guidelines. The new-age budget brands in India now need to step up and claim control or establish a process to deliver a consistent, high-quality guest experience.

Because there is no standardised routine to ensure this in an independent budget hotel, the quality of the guest’s visit is put at risk – this is what these brands have to overcome. Reservations can get mixed up, double-bookings can occur, room availability may be misinterpreted and guests may need to be accommodated at other properties. These issues can severely hamper the growth of this segment as a whole. Without end-to-end automation, the odds of a catastrophic mix-up escalate rapidly along with the hotel’s own growth. My guesstimate tells me that the percentage of hotels encountering the above-mentioned problems should easily be in double digits.

When such a high level of deficiency exists, it complicates matters for demand generators, who then have to organise manual checks and follow-ups to oversee the management. This is unchartered work for them and negatively impacts their bottom-line at the end of the day.

Moreover, with room prices starting from just Rs.999, the commissions that these demand generators earn would be as little as Rs.200! With margins this low, the additional overhead costs that come with maintaining consistency can severely inhibit the model’s profitability.

Without a certain degree of control over the properties being listed, establishing consistency can become a real challenge as most of these properties have no comprehensive processes to ensure clean rooms, washed linen, replenished toiletries and so on. We owe it to the buyer to provide everything that is promised during the sale, and given the existing infrastructure, resource base and automation levels of these suppliers, it is almost impossible to fulfil this promise. Having said that, the demand generators cannot be expected to monitor each and every guest-cycle either as it will affect their long-term economic stability. There is an overwhelming need for a solution that allows the properties to monitor their own operations effectively, while also simplifying communication between the supplier and the brand/demand generator. This is what the demand generators can do – focus on supplier-side technology.

Being Proactive

By taking initiative beyond generating bookings and branding the property, the brands can equip these properties with processes and technology that can simplify this management for both parties. Take automation of repetitive tasks for instance: this can significantly bring down the number of human errors and unsatisfied guests, enhance the guest experience, and even lighten the load on the hotel’s staff. In addition, technology can also automate certain aspects of the collaboration between the supplier and the demand generator, lowering costs as well as dependence on manpower. By employing these methods, these demand generators can ensure long-term sustainability; to be fair, it’s not easy! As I write this article, I’m sure that even they are probably mulling over this strategy. It’s easier said than done, but it is necessary to bring about the disruption we all want to see.

Domestic tourism is scaling new heights every year and is among the primary elements behind inbound tourism – there were over 1.3 billion domestic trips recorded in 2014. The opportunity to ride this wave is there for the taking and with the right tools, properties across the country will be able to benefit from this growth.

We are already seeing these companies target the South-East Asia Market. Thailand, Indonesia, Malaysia and many more nations could benefit from such initiatives, and soon we will either see these brands venture into these markets, or their clones mushroom there. These are good times for small and medium business owners, a segment of hospitality that is well-poised for rampant growth and we at Hotelogix couldn’t be happier!

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