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Monday, 07 Jul 2014
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Growth prospects are quite positive for Hospitality sector
Growth prospects are quite positive for Hospitality sector-by P K Mohan Kumar


Q. Budget Hotels - has this concept gained momentum in India? Your views?


Traditionally, the Indian hospitality industry has been catering to the needs of the luxury traveller with little or no branded penetration in the mid-market and economy segment.

During the 2008 economic downturn, the tourism sector which became heavily dependent on domestic travel was unable to fulfil the industry needs. Domestic travellers were dependent on unbranded categories of hotels as they could not afford the luxury ones. So, if one had to go to Tier- II or Tier-III cities, there was no presence of branded hotels there. Therefore, the need to develop mid-market and budget category hotels emerged. Over all, India offers enormous opportunity for mid-market and budget brands to spread their wings across nearly 8,200 towns and cities. According to the Deloitte report, international tourism is expected to quadruple by 2015 and the biggest growth in the last few years has been recorded in the mid-scale to budget hotels. Growth prospects for the hospitality sector are positive, especially for the budget segment in which the Ginger Hotels brand operates. We have major plans for growth and expansion over the next three years and Ginger plans to open and grow from the current 2700 to over 8000 rooms by 2016-2017.


Q. How has the journey been for Ginger hotels so far?


Each brand has its own space. Today, you have the young profile of Indians travelling across the country. For them, it is not the luxury segment, but a brand like Ginger that is more attractive.

With the liberalisation of the Indian economy, there has been a metamorphic change. It threw open great opportunity for the hospitality industry to redefine each segment. Now, you have a lot of international corporate travellers coming into the country. Corporate travellers look for value-driven chains. Roots Corporation is a pioneer in this new segment for budget travellers. We are observing a trend in the mid-market segment wherein primarily business travellers, SMEs and the unorganized sector business people are moving to newer towns and cities owing to business investment and expansion. This fits in very well with the Ginger strategy which offers branding products and services to this segment.


Q. What are the expansion plans of 'Ginger'?


The budget segment in India has huge potential and Ginger has come to stay as a branded niche product in the business segment. It's a well-defined product in this segment with a geographical presence of 30 properties with a strong loyalty programme. The budget segment points to a huge opportunity for growth as there are only 7,000 to 8,000 rooms in the branded budget segment, while the growth potential for this segment is 34,000 to 45,000 rooms. That's the kind of opportunity in this segment and we are viewing it very optimistically. Our plan is to bring more Ginger hotels into the micro-markets in metro cities which have a huge propensity for budget hotels. We have the largest middle class - 300 million middle class - and India had 700 million domestic travellers last year. This year, the number of domestic travellers is going to cross one billion. With this kind of buoyancy in travel, there is ample opportunity in the Tier -I and Tier -II budget segments.


Q. What are the challenges faced by the Hospitality sector in India?


Some of the major challenges in the Indian market are: Utility cost: Increase in utility and operating costs is one of the biggest challenges faced by the sector. Especially, energy costs are hurting every hotel.

Lack of skilled labour: In a country where branded hotel supply has tripled during the past decade, a quality workforce has failed to keep up.

Real-estate cost: The rapid upsurge of development during the past decade has seen the cost of land manifold. Owing to this price rise the land cost now accounts for 45% and above of the total expenditures for hotel construction.

Government red tape: The system for opening a new hotel in India is extremely challenging and adds to the development cost. Any given hotel project requires from 70 to 120 permits which extends the development cycle anywhere between five to seven years.

Infrastructure: The MICE segment in India is very strong and we see immense potential for growth. However, the biggest challenge in the country is infrastructure. Unlike other major MICE destinations such as Singapore, Hong Kong, Dubai etc, the government has developed prodigious infrastructure to attract global MICE players. The Indian market falls short of attracting global players owing to the lack of infrastructural development.


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