BUDGET HOTELS __________________________________________________________________

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INTRODUCTION TO HOTEL INDUSTRY
A hotel can be defined, “an establishment which supplies boarding and lodging not engaged in inter state commerce or any intra state commerce, competitive with affecting inter state commerce”. “With the establishment of money during 6th century BC came the first real opportunities for people to trade & travel.” As the areas of movement widened, their need for lodging became greater. Today one of the fastest growing sectors of the economy of our time is the hotel industry. The hotel industry alone is a multi-billion dollar and growing enterprise. It is exciting, never boring and offers unlimited opportunities. The hotel industry is diverse enough for people to work in different areas of interest and still be employed within the hotel industry. This trend is not only in India, but globally too. According to World Travel and Tourism Council [WTTC], global tourism is projected to grow at 5.8% in 2004 and 4.5% over next 10 years [2005-14]. India would be one of the fastest growing market, which is expected to grow 10% in 2004 and generate economic activity of Rs1,846.3bn [US$ 39bn]. According to WTTC, India would grow 8.8% between 2004-2014 to generate economic activity of Rs7,028bn [US$ 90bn] by 2014.

BUDGET HOTELS __________________________________________________________________

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INDIAN SCENARIO
Prior to the 1980's, the Indian hotel industry was a nascent and slow growing industry primarily consisting of relatively static, single hotel companies. However, Asian games in 1982 and the subsequent partial liberalization of the Indian economy generated tourism interest in India with significant benefits accruing to the hotel and tourism sector in terms of improved demand patterns. Fortunes of the hotel industry are tied to the fortunes of tourism and the general business climate in the country, which is why the economic liberalization initiatives implemented since 1991, led to a soaring demand and supply gap in the hotel industry. This enabled Indian hotel companies to increase their ARRs by almost 50% between April 1994 and April 1997 and still enjoy extremely high occupancies of above 80% for most of this period. Foreign travelers consist of 80% of the total clients, while the rest are domestic travelers. In recent times, any discussion on the hotel industry only veers around the falling occupancy rates and average room rates and the trying times that the Indian hotel industry is going through. Nevertheless, the hotel industry has reported impressive earnings and revenue growth for the year ended March 2001. This was after a slack period in the financial year 2000, when net profits dipped on a negative sales growth. Business travel is the largest segment of travel and today India's corporate travel market is today estimated at no less than US$ 3 billion (around Rs 150 billion). An increase or decline in business travel mirrors economic trends. India with its 8 per cent GDP growth rate and stable economy has witnessed an all round development, especially in the travel and tourism sector. Business travel thrives best in a free and robust economic scenario and India is gradually moving in that direction. With liberalisation paving the way for healthy competition and business going global the Indian traveler too is evolving into a global traveler. A liberal foreign exchange regime and cheaper air-fares, ex-India are also factors responsible for catapulting business travel. Subsequently, with travel budgets of Multi –national corporation running into several million dollars, airlines, hotels and all other service providers have rolled out the red carpet for this cash cow. Indian companies are now following suit, with almost all blue-chip companies having detailed travel policies. Travel costs have emerged as the third largest expense for corporate, after salaries and raw materials. These globe trotting Indians; have metamorphosed as a distinct market.

BUDGET HOTELS __________________________________________________________________ They are well traveled and demand the services they pay for. Of late, the government of India has started realizing the importance of tourism in the country’s economic

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growth. India’s emergence as a super power and an overall buyout economy has led to an increase in foreign tourist’s arrival to a record level in 2004 which reached 3.5mn in 2004 and is expected to 5mn this year. All this coupled with the continued demand supply mismatch in rooms availability has turned favorable for the hotel companies with the room rates and occupancies touching an all time high. The present trend is expected to continue with the new capacities coming only after two to three years.

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REASONS FOR GROWTH OF THE HOTEL INDUSTRY
Rising foreign arrivals
Foreign tourist arrivals continue to surge. During January - September 2004, foreign tourist arrivals in the country have risen by 25.5% to 2.3mn. It is expected by the end of the calendar year tourist arrivals into India would cross the 3mn mark. Business travel into India has been on the rise with globalization and rising investor interest in India - one of the fastest growing economies in the world. Business travelers account for almost 75-80% of arrivals. The “Incredible India” campaign launched by the Ministry of Tourism has also gathered momentum and is showing results.

Domestic tourism also on an upswing
A growing economy, rising disposable incomes and easy finance available for holiday packages have led to increase in domestic leisure travel. Falling airfares have also contributed to increase in travel frequency within the country. The number of people who travel domestically (for religious, leisure or business purposes) has been rising. As per NCAER study, there are 5.5bn domestic tourists of which 7.7% are business travelers, 6% are leisure tourist and the rest travel for religious or social reasons.

Cyclical industry The hotel industry is sensitive to changes in the domestic and global economy.5% CAGR until 2010 According to World Tourism Organization [WTO] foreign tourist arrivals in the country are expected to witness a 6. .BUDGET HOTELS __________________________________________________________________ 5 Tourist arrivals projected to grow at 6. We believe that the Indian Hotel and Tourism Industry is on a long term growth trajectory and domestic hotel companies who have expanded capacities in the last few years are well placed to capitalize on this boom.5% CAGR to 6mn by 2010 and to 10mn by 2020. General economic conditions and recession in the economy affects business travel and hence demand for rooms in the hotel industry. The hotel industry has passed through a slowdown in the last 2 years and we believe that the up-cycle has just commenced and would continue for next 2-3 years at least given positive economic growth forecasts. Earnings rise multifold during boom periods. The hotel industry typically passes through phases of low occupancies – when are unable to cover fixed costs and incur losses. External factors The hotel industry is significantly affected by external factors ranging international socio-political environment to regional events (like the conflict in Iraq and SARS) which impact the level of travel and business activity. Tensions on border and travel advisories issued by western nations also affect the hotel industry.

All the star hotels in India are government approved with continuous control on the quality of services offered.  Five Star Hotels These are top of the line hotels located mostly in the big cities.  Five Star Deluxe Hotels The most luxurious and conveniently located hotels in India are grouped under Five Star Deluxe Hotel Category. India also has hotels divided in different categories depending on their location. Agra. infrastructure. and amenities provided. These hotels provide all the modern facilities for accommodation and recreation matching international standards in hospitality. Many of these hotels are situated in the Central Business Districts of the metropolitan cities or near the centers of transportation providing exceptional value for the business travelers. Five Star Deluxe hotels in India are globally competitive in the quality of service provided. and Goa. Quality of the services is almost as high as the five stars and above categories. and accommodation options. These hotels are located primarily in metropolitan cities like New Delhi and Mumbai and major tourist destinations like Jaipur. These kind of hotels are there for the travelers with a limited budget or for the places which might not be getting tourists traffic as associated with larger cities.BUDGET HOTELS __________________________________________________________________ 6 CLASSIFICATION OF HOTELS On the basis of Star Categorization Like most of the countries in world. .  Four Star Hotels A rank below five star hotels. facilities offered. Four star hotels provide all the modern amenities to the travelers with a limited budget. facilities.

Lesser in amenities and facilities. These hotels are best when you are looking for cheapest available accommodation option (apart from camps and hostels). Services would be the stripped down version of higher categories of hotels but sufficient to fulfill your basic needs. All hotels between 4 stars to 1 star category are considered as budget hotels .BUDGET HOTELS __________________________________________________________________  Three Star Hotels These are mainly economy class hotels located in the bigger and smaller cities and catering to the needs of budget travelers. these hotels provide all the basic facilities needed for general accommodation and offers lowest prices. small number of rooms.  One Star Hotels The hotels with most basic facilities.  Two Star Hotels These hotels are most available in the small cities and in particular areas of larger cities. and location in the far flung areas are grouped under One Star Hotel category. Catering to the backpacker tourist traffic. these 7 hotels are value for money and gives good accommodation and related services on the reduced price.

havelis and forts being converted into hotels. Generally found in smaller towns and cities. Comprises of 4 to 1 star hotels catering to average and domestic leisure travellers. It involves effective preservation with commercial capability. Located at the outskirts of city could be from premium to budget category Budget segment Heritage Hotels Resorts and Clubs .BUDGET HOTELS __________________________________________________________________ 8 CLASSIFICATION BY SEGEMENT The sector could be broadly classified into following 4 categories Premium or Luxury segment Comprises of 5-star or deluxe hotels catering generally to business and up market foreign travallers. Account for nearly 30 per cent of the room base. Comprises of palaces.

In the medium to long term. 10 million for a hotel in the premium segment . Premium Segment Some hotel companies have brands catering only to the premium segment. According to industry sources internationally. On an average. In case of other foreign players such as Marriot. over 65 per cent of the total rooms were in the premium segment. Most major hotel companies in India have that brands that cater only to the budget segment. The main foreign players in India catering to the premium segment include Hyatt and Le Meridian. 80-85 per cent of hotels in the budget segment are branded.200 – 3. while in India only 15 per cent of budget hotels are branded. hotels in the budget segment charge Rs. The main domestic players catering to the premium segment include Asian Hotels. Bharat Hotels and Hotel Leela venture. over 75 per cent of the total rooms were in the premium segment. 1.000 per room. as against Rs. the number of hotels and rooms in the budget segment is expected to increase due to the need for low priced accommodations (as a result of reduction in corporate travel). In case of other domestic players such as East India Hotels. Most hotel chains have a presence across segments with the aim of catering to a wider market. The average cost for setting up a budget hotel (80-100 rooms) ranges from Rs 3 – 5 million per room. per day.BUDGET HOTELS __________________________________________________________________ 9 CLASSIFICATION BASED ON THE TYPE OF PROPERTY Hotel companies can be categorized as premium and budget on the basis of the classification of their properties. Budget Segment Most of the budget hotels in India are independently owned and are not branded. ITC Welcome group and the park hotel.

there is a heightened activity in construction of new hotels during the last 2 years. Out of this 27301 are 5 star and 5 star deluxe hotel rooms and the remaining 64419 are in the lower category hotels including heritage hotels and those which are awaiting classification.03.720 hotel rooms in all the approved and classified hotels in India in 2003. chains and other investors are increasing their investment in this sector. All interested hotel companies. As per published statistics of Ministry of Tourism. this is a part of regular activity and there are a lot of budget hotels under construction. as also in other countries.000 hotel rooms in the country in the unapproved category and all of them will be in the budget category. Government of India. The importance being given to the budget hotels is correct because this category accounts for the largest number of hotels and hotel rooms in India. Considering that hotels are a good business. All hotels below 4 star categories are lumped together as budget accommodation. Both domestic and international tourists as well as occupancy in hotels have increased by about 15% during the last 2 years starting from the winter of 2002 .BUDGET HOTELS 10 __________________________________________________________________ INTRODUCTION TO BUDGET HOTELS There is no clear definition of budget hotels in India. according to FHRAI reports. The average room rate (ARR) realised from business travelers is normally higher than from leisure travel. More than 50 per cent of occupancy of a majority of hotel members of the country’s largest hotel association. As for the progress made in construction of budget hotels during the last few years. there were 91. There will be another approximately 400. the Federation of Hotels and Restaurants Associations of India (FHRAI) reportedly comes from the business travel segment. This is the commonly accepted definition in the industry and the media. Unfortunately there is no reliable statistics in India about total number of hotels and hotel rooms other than those approved and classified by the Government. .000 to 500. Thus about 70% of hotels in the country in the approved and classified category are accounted for by the budget hotels.

According to Government statistics.5 million foreign tourists in 2004. It is thus certain that demand for budget hotels will continue to grow and at a much higher rate than the 5 star hotels. This works like a pyramid where cheaper rooms occupy the widest base at the bottom and the pyramid tapers off at the top with 5 star hotels. are targets for the budget hotels. This is the position in all countries. there are about 300 million tourists or tourist trips annually by domestic travelers compared to 3. The number of travelers and the hotel rooms are therefore much more in the lower category hotels. About 25% of foreign leisure travelers also stay in budget hotels.BUDGET HOTELS 11 __________________________________________________________________ Majority of domestic travelers. . This is particularly so as the domestic travelers in India are many times higher in number than foreign tourists who mostly stay in 5 star and heritage accommodation. whether they are for business or leisure.

Ooty. Pune. and Accor Hotels are in touch with the Indian Railways to set up budget hotels near railway stations. Hotel operators will be free to price the other rooms according to the services provided. including ITC Welcomgroup. . The hotels will be set up on land owned by the railways. The project is being developed by the railways through a public-private partnership model. Visakhapatnam. are among the interested ones. Rameshwaram and Kanyakumari.BUDGET HOTELS 12 __________________________________________________________________ PLAYERS The players in the budget hotels category are mostly independent hotels. Some national chains like Taj Group and ITC also have few budget hotels but in very small number. Accor and Taj. Coimbatore. Amritsar. These companies are in touch with the railway authorities and are expected to formally bid for these projects IRCTC has specified that at least half of the rooms in these budget hotels should be available at tariffs lower than Rs 1. a number of players. and the locations identified for the first phase include Kolkata. Howard Johnson and Days Inn. The ITC Welcomgroup. Ernakulam. and the hotel companies will handle the management. then the percentage of branded hotels will be negligible. Chennai Central. These belong to various international chains like Park Plaza. but will not offer frills like room service or carpeted flooring. The second phase of this project will cover Anand Vihar and Nizamuddin in Delhi. If you see the entire segment of budget hotel rooms in India including approved and unapproved. Katra. Ahmedabad. Lucknow. Country Inns and Suites by Carlson. Indian Railway Catering and Tourism Corporation (IRCTC) has invited tenders for budget hotels in Habibganj (Bhopal). Low-cost rooms will be airconditioned. Best Western. Park Inn. Vijayawada. Holiday Inn. the branded hotels will be less then 5%. Sealdah (Kolkata) and Madurai. Choice Hotels. Nagpur. Tirupati. While formal bids are expected soon. Baroda.000 per day. Taj Group. Bhopal and Madurai. Mumbai Central. Even in the approved hotels.

500 crores investment to open 50 Kamfotels in the next seven years – Kamat is entering the budge. Together they are redefining budget hotels promising good management. If you take the all India scenario. This will account for both approved and unapproved categories. With the Kamfotel chain . The Mumbai hotelier’s mission is t set up budget hotels at 90 minute intervals from each other on busy highways. In some cities. the Orchid Hotel and many restaurants across the world. the market share of budget hotels will be about 70%. and higher standards of hyena and facilities. In the last one year. The target market for them is obviously budget travelers. Though demand is the highest in the mid market segment. foreign franchises has shown interest. The Kamat group today owns the Kamat chain of restaurants.hotel segment. fresh entrants. THE GROWTH IN INDIA Till now the growth in the Indian hotel industry has been lopsided. A large number of corporate travelers are in the middle level or lower level managers who have low traveling budgets and stay in the budget hotels.BUDGET HOTELS 13 __________________________________________________________________ MARKET SHARE The market share of budget hotels in Mumbai and in India will be about 90% if you take the number of rooms and occupied room nights in a year.000 rooms in the starred category with 6. During a downturn. the luxury segment accounts for the most growth. the growth for new budget hotels may be about 10% over the next 5 years. it can be more and in many cities where existing hotels are running modest occupancy rates. Further there is a shortage of 30. deluxe hotels are hit first following the decline in foreign tourist traffic. a new breed – big hotel chains. . Budget hotels which target domestic travelers would enable big chains to even out of fluctuations. If you only take the approved category hotels.a Rs.000 rooms. the growth rate will be less than 10%. Kamat is not the only one eyeing the budget hotel opportunity. In this context budget hotels make sense for major hotel chains.000 in the 5 – star and 5 – star deluxe categories. Delhi for instance has 9. both corporate and leisure.

Based on how Ibis fares it might bring in its hugely successful Formulae 1 budget chain which price-wise is one notch lower than Ibis. . Global Hospitality majors like Accor Choice Hotels and Microtel are also getting in. Besides indiOne. The budget hotel is a good business proposition. The Taj Group had launched the gateway chain at a slightly higher price bracket than its indiOne brand. This was the accumulation of Indian Hotels five –year . the occupancy is between 30 and 78 per cent. Next in line is Sarovar Park Plaza’s Hometel chain with its proprietary coming up in Bangalore. Accor is bringing its Ibis chain here. Then the Oberoi and the ITC welcome group had positioned their Trident and Fortune Hotels as Budget Hotels. while Fortune chain has a mix of hotels – 4-stars and low priced hotels – depending on the cities they operate in. Almost a year old. The conceptualisation of indiOne was different from that of a Taj Hotel. Even Indian Railways Catering and Tourism Corporation are setting up six budget hotels outside major railway stations on surplus land belonging to the Indian Railways. Trident. indiOne operates at near full capacity. a separate fir to set up indiOne. Indian hotels spun off Roots Corporation. As many as six new chains are waiting in the wings. this is the only chain pegging tariffs below Rs. Lemon Tree Hotel clocked average occupancies of 92 per cent last winter – a rare event in the hotel industry (For 5 star and 5 star deluxe hotels. morphed into a four star and lowpriced hotel. Even indiOne was unveiled in Bangalore which is owned by Indian Hotels. Attempts in the past by the major players to carve out budget hotels. 1000 a day. especially when the interest rate for financing hotel projects comes down to 8 – 10 per cent as opposed to 18 per cent in the early 1990s. however. Likewise.BUDGET HOTELS 14 __________________________________________________________________ The idea is to deliver 80 percent of a 5 star hotel at 40 percent of the price – this being the aim of Krizim Hotels that has budget hotels under the brand name of Lemon tree which is in Gurgaon. 1000.old project to develop a hotel which would deliver value at Rs.

Simply putting it forward the target audience for budget hotels can be as under: 1) Business travelers who come and stay at Mumbai for long business trips. It is thus certain that demand for budget hotels will continue to grow and at a much higher rate than 5-star hotels. 2) Small families belonging to middle class visiting Mumbai as tourists 3) General middle class people 4) Decent and elite corporate crowd 5) Foreign Tourists . are targets for budget hotels.BUDGET HOTELS 15 __________________________________________________________________ TARGET AUDIENCE Majority of domestic travelers. This works like a pyramid where cheaper rooms occupy the widest base at the bottom and the pyramid tapers off at the top with 5-star hotels. whether they are for business or leisure. This is particularly as the domestic travelers in India are many times higher in number than foreign tourists who mostly stay in 5-star or heritage accommodation. The number of travelers and the hotel rooms are therefore much more in the lower category. About 25 percent of the foreign leisure travelers also stay in budget hotels.

front office.BUDGET HOTELS 16 __________________________________________________________________ SERVICES AND FACILITIES The accommodation includes. airport pick-ups etc. The hotels various other departments like the house keeping. Some of the Services and Facilities offered by budget hotels are as under: • • • • • • • • • • • • • • • Banquet & Conference Halls Currency exchange Coffee shop Rent-a-car facilities Doctor on call Laundry service Gym Safe Zone: 24 hour security. For example they may have a self service restaurant. providing a room along with bed to sleep. Other supplementary products also include travel arrangements. all provide the supplementary services to the customer Budget hotels. close circuit TV Credit cards acceptance Electronic locks Complimentary Airport pickups Secure Parking Day Care Centre Pub Business Center Wireless Internet Facility . room service and maintenance. food and beverage. they offer minimum services and facilities to their guests as their main aim is to give rooms at affordable cost and cut out services and facilities which add to cost.

the emphasis is on maximizing the room base. A budget hotel at an average may have 80 to 100 rooms. All this saves space staffing and maintaince costs. This is done by. no bell boys etc. For this the hotel cuts down man power to reduce its costs. Lemon Tree and indiOne have controlled staffing costs by outsourcing housekeeping. A hundred room 5-star hotel would typically require 120 – 200 people to run it. In contrast indiOne has only 30 people. For a 5-star hotel the average employers per room is around 1. These hotels do maximum construction in revenue generating areas and reduce the back of the house. security and laundry. out of whom only 7-8 are employees. Outsourcing can slash salary costs to 8-10 per cent of the total cost compared to 18-22 per cent in a 5. Efforts are made to cut down costs and offer rooms at affordable and cheap rates. Usually forty per cent of the area goes into back of the house activates like kitchen and house keeping. The soon to be launched Microtel is likely to rope in coffee chains like Barista and Café Coffee Day to set up outlets at their hotel. 3500 depending on the city. efforts are made to make the maximum use of space and have as many rooms as possible. Budget hotels earn maximum revenue from the rooms. All measures are taken so as to reduce the prices of the room.BUDGET HOTELS 17 __________________________________________________________________ PRICING As the hotel is a budget hotel the prices are low and affordable. one employee performing many tasks. Usually budget hotels are priced between services offered. during lean periods the hotel can work with fewer people. location. but with outsourcing quality of a service can become an issue of concern. 950 for a night at Bangalore. Lemon Tree which has outsourced almost 60 Rs. Indione is providing rooms at Rs. But since F&B is minimized in budget hotels. There are only one or two restaurants. Smaller sizes of rooms as compared to others. spas and banquet halls. the rooms available are without any frills. unlike luxury hotels which earn as much from food and beverages and extra facilitates. Self service restaurants. 800 to Rs. and no bar. Budget hotel also do away with high investment frills like swimming pools. Typically for a luxury hotel the ideal ratio is of revenues from F&B and rooms is 1:1.star hotel. . Outsourcing is a good idea. by multi tasking.18 but in budget hotels the average staff of the full hotel may not be more that 20.

800 – 2500 1.000 – Differential pricing across cities 1. 10 crores cost.800 for Delhi 1.000 price point works. So reducing it to a cafeteria minimizes staffing requirements.950 ROOM TARRIFS (Rupees) THE COST EQUATION . BUDGET BRAND INDIONE (Indian Hotels) HOMETEL (Sarovar Park Plaza) LEMON TREE (Krizim Hotels) IBIS (Accor and Inter Globe) KAMFOTEL (Kamat Hotels) SLEEP INNS (Choice Hotels and Gupta Group) MICRO TEL (Microtel & The ABS Hotels) IRCTC (Hotels Indian Railways Catering & Tourism Corporation ) 1.000 – 1.800 1. but the moment the cost goes up the project becomes unsustainable. Though indiOne is faring very well in Bangalore.500 900.Rs. There are no Menu cards either. the sub .800 – 2. indiOne’s restaurant offer simple meals doing away with food dishes that need costly ingredients and equipment. So for a hundred room hotel with a Rs. Another Manpower – heavy area is Food and Beverages.500 – 1. This is because prohibitive land costs in cities like Mumbai and Delhi could throw the whole financial equation of the project out of gear.000 price point. Square Meal. there is a feeling that instead of a sub – Rs 1. 1.200 1. The hotel has promoted Black Fox Security management in which Lemon Tree has 50 per cent stake and an expert runs the company.BUDGET HOTELS 18 __________________________________________________________________ per cent of its services has worked out a smart alternative. a differential pricing system depending on the city would work better.200 1. If a menu card is there it would mean committing to offer all dishes at all times. Typically room charges are fixed at one thousandth of the project cost.

is critical to how the hotel turns out.BUDGET HOTELS 19 __________________________________________________________________ Hotel development traditionally competed with domestic housing and other commercial construction. the cost per room is ascertained not just on the basis of how much it cost to build and accessorise the room but the cost of other public areas of the hotel are also integrated proportionately into this figure. underwriting requirements. can extend that period to more than 12 years. Hotel developers should ideally be able to pay back loans in less than seven years. including loans not being serviced on time. in a development project. Individual accounting for specific projects can be affected by tax implications. land should not exceed 15 per cent of the overall cost because that distorts all assumptions about gestation and tariff structures. Most consultants prefer to look at a hotel from a room perspective in so much as calculating the hotel cost on a per room basis. Interestingly. . This figure. This helps determine tariff rates once the hotel opens for business. Accounting for these items is not always the same from one project to another. Others Costs There is no uniform system of allocation for hotel development budgets. Land Factor While other costs vary. furniture. fixtures. the construction industry today is competing for materials and capital. he says. which dents the reputation of the industry in general from the perspective of financial institutions. Acquiring land at exorbitant prices. consultants stress. There are other implications to violating cost discipline. It is the very definition of starting off on the wrong foot. A Hotel development costs are accounted for in numerous line items and categories. For example. and investment structures. and equipment installation and construction finish work can overlap.

of which the first one is relatively simple. BUDGET BRAND INDIONE (Indian Hotels) LEMON TREE (Krizim Hotels) SLEEP INNS (Choice Hotels and Gupta Group) MICRO TEL (Microtel & The ABS Hotels) HOMTEL (Sarovar Park Plaza) 9-10 lakh 7-8 crores for a 50 room property (including land) 10-15 crore per property 13-17 lakh 10 lakh Project Cost (Rs.e. Debt is very critical in the capital mix. A luxury hotel could be built at anywhere between Rs 25 lakh to Rs 100 lakh a room. It is their business. i. the civil structure which is built of steel or is a reinforced concrete structure. Hotel developers are considerably better placed to own hotels because they are able to price in all costs. Stressing on the need to reduce credit servicing pressure for new projects./Room) INDUSTRY COSTS . that price is considerably lower as specifications are not as significant. The emphasis is on basic functionality which is what the guest pays for.BUDGET HOTELS 20 __________________________________________________________________ But how much must one spend on lifting the aesthetic value of a hotel? The answer is one that points to the intangible. and then comes the interior. The quandary with excessive spend on accessories is that the value of it is not as overtly apparent as the service. especially those that can escalate quite quickly. Hoteliers must not view owning hotels as part of their core competency for too long. excessive debt should be avoided and measures should be taken debt is kept in control as it could hamper the profit and rate of return on capital. There are two elements to the construction of the hotel. The Debt Factor Another critical element to be factored into project cost is the servicing of the debt taken to build the hotel. For budget hotels.

marketing Property and taxes Insurance Variable costs include • • • Room expenses. The key expenses incurred in operating a budget hotel are employee costs. F & B costs. light and power costs.BUDGET HOTELS 21 __________________________________________________________________ Operating Costs The expenditure incurred by hotels can be divided into two broad categories – fixed and variable costs. Fixed costs include • • • Administrative and general expenses (a small portion is variable). The variable component is linked to the occupancy and the facility usage (use of F&B and other leisure facilities) that produced the known level of revenue or expense. Employee Costs . fuel. Direct expenses for food and beverages and Management fees There are some items that are classified as semi – fixed expenses since they include both fixed and variable portions These include • • Energy costs Operation and maintenance expenses.

F&B costs also include the cost of F&B supplies. Segment-wise contribution margin . In indiOne have only 30 people. They may have self service restaurants.5 per room. Food & Beverage Costs It consists of the costs incurred for the operation of a hotels food and beverage and banquet facilities. Budget hotels outsource activates such as laundry etc. which form the largest cost component for the hotel industry are the key costs monitored in this sector. kitchen stewarding expenses (such as cleaning supplies). the hotel may be managed by 10 to 15 people maximum.BUDGET HOTELS 22 __________________________________________________________________ Employee costs.8 per room is higher than the international norm of 1. they try and cut down the manpower employed in F&B operations. In addition to employee cost incurred in F&B operations. out of whom only 7-8 are employees. and service department costs (laundering napkins and table cloths) Budget hotels have only one to two restaurants. In India the manpower to room ratio of 1. Budget hotels also outsource laundry and other such expenses which further reduce the costs. Budget hotels do not have many employees.

An increase in ARR results in direct increase in room contribution. restaurants and banqueting activities. F&B revenue includes income from room service.BUDGET HOTELS 23 __________________________________________________________________ Room Contribution Room contribution primarily depends on average room rates (ARR) since costs such as manpower and energy. as they have limited restaurants they do not earn much revenue from theses services. The revenue from room service is directly dependant on the room occupancy in the property. which are associated with rooms. Budget hotels earn revenue from this source also. Budget hotels aim at earning most of their revenues through rooms. Room contribution is the highest and accounts for 80 per cent of the total revenue. . are not significant. F&B Contribution F&B contribution depends on F&B revenue and cost.

These systems have become supermarkets. For instance according to a Travel Click survey. However the usage of the same is very low in India. In contrast. linking buyers and sellers and allowing reservations to be made quickly and easily. GDS (Global Distribution System) A global Distribution system is a network of electronic reservation systems used by buyers (travel agents and public) and sellers (hotels. airlines car rental companies etc. who are the link between the traveler and the hotel/airline. GDS accounts for over 55 per cent of the bookings made for city based hotels. screens display availability across several carriers. however neutral displays can vary across GDS. .) to exchange travel related services. In neutral display. The primary advantage of GDS for travel agents is that it offers single point access for reservation on all airlines. internationally. CRS (Centralised Reservation System) Many hotels companies especially hotel chains have installed this reservation system. generally make corporate bookings. and other travel related products. executive assistants or secretaries. electronic bookings (GDS plus internet) account a major share for hotel reservation. According to sources. involving 33 major hotel chains and brands. connecting all properties.BUDGET HOTELS 24 __________________________________________________________________ RESERVATIONS AND DISTIBUTION CHANNELS Globally. the share of electronic bookings in India was less than 25 percent. in a format known as neutral display. Booker The travel manager. in 2004 electronic booking accounted for 58 per cent of the total global hotel reservations.

Branded budget hotels in India like indiOne and Lemon Tree and using the internet as it helps them in cutting down the over all cost and with which they can pass on the benefit to the people by providing rooms at economical rates. Hence.BUDGET HOTELS 25 __________________________________________________________________ Tour agent/Travel agent (Booking via a GDS/CRS) In the mid . Travel and tourism reportedly forms the second largest category of products sold through the internet. profits of travel agents were adversely affected. Such fee – based travel agents differ from commission based travel agents. In addition commissions were reduced and a commission on ceiling was introduced. . leading small hotels of the world and airline tie-ups. Marketing Alliances Hotel properties/chains are often associated with marketing alliances. Other alliances include small luxury hotels of the world. as airlines and hotels sold their products directly to consumers through the Internet. Major marketing alliances include leading hotels of the world. and are known as travel management companies. These alliances provide the hotel direct access to reservation network. and direct negotiations with consumers. Internet The use of the internet in making hotel reservations has increased due to increased internet penetration and cost effective access. Airline tie-ups Hotels also have promotional tie –ups with airlines.1990s. For instance. travel agents altered their fee structure and have been charging a fixed fee for the services rendered. in the US. hotels could provide free accommodation for points accumulated under the frequent flyers schemes of air lines. promotion and internet coverage.

24 x 7 x 365 availability Reduction in fixed sales outlets Reduction in clerical errors and administration costs The variety of products that can be delivered over the network. and The support provided to customer relationships.BUDGET HOTELS 26 __________________________________________________________________ The primary elements for the extensive usage of Internet in travel bookings are • • • • • • • The absence of geographical limitations to the market (direct communication between buyer and sellers) Huge reduction in transaction and processing costs. PROMOTIONS .

BUDGET HOTELS 27 __________________________________________________________________ There are a number of components for promoting the business which are used by blending the different constituents in such a way that effects are proactive but the process of persuasion is cost-effective. Branded budget hotels such as indiOne and Lemon Tree use promotions more than unbranded budget hotels. promotions add up to the cost which will effect the price hence budget hotels use minimal promotions. Discount coupons REGULATORY AUTHORITES AND TAXES . These are some of the promotions used by hotels • • • • • • • • • • • • Website advertisements FM advertising in cities Email Blast: E-mail to all travel agents and corporate Travelers card for frequent travelers various offers and discounts to be offered Meal coupons / discount Launch party for corporates / tour operators Pop up ads Advertisements on trolley used in airports Press release in regional language news papers Airport transfer system Promotion through travel agents. Budget hotels rely less on promotions as their aim is to give rooms at economical rates.

LPG. sewage collections Fire officer Chief electrical Inspections Reserve Bank Of India Sales Tax officer Regional Transport Officer Inspector – explosives Collector of excise and customs Performing rights society of India Municipal Corporation . local development authority and land ceiling authority Clearance and approval of plans of site Urban arts commission Taxes . gas tank Cold storage Music in lobby and other areas Sanction of water supply. Electricity Board. electricity. oil storage.BUDGET HOTELS 28 __________________________________________________________________ Hotels: Regulatory Authorities Requirement Approving Authority Approval of project Director General of Tourism (GOI) and Department of tourism state concerned Catering establishment license Bar License Labour Registration No-objection certificate from Police Import License Municipal Corporation Excise Department Directorate of Labour Superintendent of Police Director General of Foreign Trade(DGFT) Fire prevention fitness Fitness license of electrical installations Money Exchange License Sales Tax and registration Hotel Transport and Car Barrels.

8-22 13.0 - SOME PLAYERS IN THE INDUSTRY HOTEL KUMARIA PRESIDENCY .5 12-17.2-90 9.0 0-8.5 1-10.25 Turnover tax (%) 1.5-15 10 0-10 7.2 0-12 0-8 0-31.2 10.BUDGET HOTELS 29 __________________________________________________________________ The central government charges service tax to the hotel.5 4-32. sales tax and turnover tax on food and beverages. Service tax % (Feb 05) 8.5 8 7. State – wise luxury tax and sales tax (March 2003) State Andhra Pradesh Assam Bihar Delhi Goa Gujrat Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Madhaya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Luxury Tax (%) 0-5 10-20 7 0-12.2 1-20 0-8.0 10.5-15 10 0-6 0-10 5-12.8 0-8. dry-cleaning The state government charges luxury tax on rooms and.8 8-25 0-20 8.2 Banquets Conferences Health clubs. The hotel collects this service tax from the people using the services on behalf of the government and further pays it to the government.5 5 13 Sales Tax (%) 8.8 0-34.5 0-20 9.

00 Noon : INR : 2145 : 2420 : 6% : 10% on Single Room. Access Rooms Check In / Out Time Tariff Single Double Service Charge Luxury Tax Cuisine Air-Conditioning Credit Cards Other Facilities : 1/2 km from International Airport. 3 km form Domestic Airport : 29 : 12. A.HOTEL IN MUMBAI (BOMBAY) (3 STAR HOTEL IN MUMBAI) . Kanika Restaurant & Bar. Coffee Shop & Pub.400 059. Road. Conference Centre. 2 Banquet Halls. HOTEL TRANSIT. Visa & Amex : 24 Hr. Chinese & Continental : Centrally Air-Conditioned : Master. Marol. Andheri (East) Mumbai .K. 6% on Double Room : Indian.BUDGET HOTELS 30 __________________________________________________________________ Location The Hotel is a five minutes drive from the international airport. Facing International Airport. MUMBAI . Courtesy Coach To & From Hotel and Airport.

Harvard Executive is the Plush discreet Conference/Meeting Hall of the Transit Hotel that can seat up to 25 people. and 20 ft from Centaur Hotel Bus Stop. HOTEL BAWA INTERNATIONAL . Sizzlers. Street Side Café: It is the Authentic International Cuisine Café. are Pastas are amongst the must checkouts here. The HARDVARD HALL offers a well-trained staff and accommodates up to 75 pax. Hotel Transit Mumbai is located 2 kms.HOTEL IN MUMBAI (BOMBAY) .BUDGET HOTELS 31 __________________________________________________________________ Location Hotel Transit is situated in close proximity to the Mumbai Airport. Facilities at Hotel Transit Conference and banquet facilities are available at the Transit Hotel of Mumbai. Complimentary Airport transfers round-the-clock are also available. Accommodation at Hotel Transit Transit Hotel offers 54 luxuriously appointed rooms for the stay of its guests in Mumbai. Mock tails. VCR. Transit offers five customized Suites with designs based on the Themes from Indian Heritage. Dining at Hotel Transit There are several F&B outlets at the Transit hotel Red Grill: It is the restaurant and bar of the hotel that serves Indian dishes. OHP or many other facilities are available here. from Railway Station.

from Bus Stand. Room Category Single Occupancy Double Occupancy Executive room 3800 3800 Deluxe suite 6400 6400 Super deluxe suite 7400 7400 HOTEL AIRPORT INTERNATIONAL. Vile Parle (East). Chinese and Continental cuisine. Dining facilities at Hotel Bawa International The in-house restaurant of Hotel Bawa International serves Indian. close to domestic airport. Accommodation at hotel Bawa International Hotel Bawa International has 76 rooms. It is 2 kms. from Vile Parle Railway Station and 3 kms. Facilities at Hotel Bawa International Banquet-cum-Conference halls for 40 and 80 covers respectively are available at Hotel Bawa International.BUDGET HOTELS 32 __________________________________________________________________ Location Hotel Bawa International is located at Nehru Road Extn. which include 72 double rooms and 4 suites. MUMBAI (HOTEL IN MUMBAI) .

Fax. 1 km.H/C running water. professional staff . from Vile Parle Railway Station and 1 km. Tariff Check in /out time: 12 noon Room Category Executive room Deluxe room Superior deluxe room Single Occupancy Double Occupancy 2000 --2500 3000 4500 5000 LEMON TREE HOTEL (GURGAON) . Airport transfers. Laundry. Doctor on call.V. Telephone and C. and E-mail. Accommodation at Hotel Airport International Hotel Airport International has 28 air-conditioned Rooms which include 10 single rooms and 18 double rooms. from Domestic Airport. from Bus Stand. Facilities at Hotel Airport International Striking décor.BUDGET HOTELS 33 __________________________________________________________________ Location The Hotel is located 1/2 km.T. Services at Hotel Airport International Hotel Airport International offers Room service.

a color printer.BUDGET HOTELS 34 __________________________________________________________________ Lemon Tree Hotel Located within Udyog Vihar offers between 50-120 high quality rooms (fully air conditioned. Service offerings will also include round the clock reception.a multi-cuisine restaurant. two telephone instruments. Accommodation at Lemon Tree Hotels:The Lemon Tree Hotel. These are fully equipped to function as mini offices. laundry and room service Business Facilities The hotel offers instant high speed net access from all residential rooms in addition to the business center. a fitness center and a swimming pool (optional). a functional work table. with instant high speed net access. Udyog Vihar has 49 rooms. Standard single rooms : Superior single rooms : : Superior single/double : rooms Twin rooms : 31 rooms with single beds 02 rooms with single beds 01 room for the physically challenged 03 rooms with queen sized beds and a sofa cum bed 12 rooms with two separate beds Tariffs . scanner. conference room and board room. The hotel's business center is equipped with a LASER jet B&W printer. housekeeping. photocopier and two individual workstations with Pentium 4 systems and TFT screens. a fully equipped business center with meeting rooms. thermal binder. refrigerator and running hot and cold water). recreation and entertainment facilities.

Serving breakfast lunch and dinner IndiOne (Bangalore) .BUDGET HOTELS 35 __________________________________________________________________ Room Category Standard Single Room Superior Single Room Twin/Double Room Check out time: 12 noon Rs. 3000 3600 4200 Restaurants and Dining The hotel’s bright and inviting 24 hour Coffee Shop called The Citrus Café.

with treadmill. Double Rooms: 8 rooms with a queen-size bed. Tariffs Room Category Single Double/Twin Single Occupancy 900 950 EMERGING TRENDS SERVICE APARTMENTS . Single Rooms: 72 rooms with single beds.BUDGET HOTELS 36 __________________________________________________________________ Location: hotel is located opposite the KTPO Exhibition Complex. close circuit TV Secure Parking Doctor on call Credit cards accepted Accommodation at IndiOne: 101.seats 10 people Laundry facility – same day laundry Gym . Other Facilities • • • • • • • • • • Cyber cafe Meeting room . A room for the physically challenged Check out: 24 hours from check in. 45 minutes away from City Bus Terminal and Railway Station Dining Facilities : the hotel has a restaurant called The Square meal. a self service restaurant. iGate & GE Medical Systems offices in KIADB in Whitefield. exercise cycle and weights Digital safe deposit boxes ATM Safe Zone : 24 hour security. Twin Rooms: 20 rooms with two separate beds. 30 minutes away from Indiranagar. Serving breakfast lunch and dinner. 25 minutes away from Bangalore Airport. SAP Labs. next to Perot Systems building in the area around Dell.

though a recent phenomenon in India. is an established global concept. the concept is particularly popular with business travelers. offering the comfort and convenience of a home without the hassles of having to maintain or look after it. A service apartment is more spacious and is equipped with all the amenities that a long-staying guest needs. Ideally suited for medium to long staying guests. During a certain market research it was found that executives in India really do not want to cook but would like to fix an occasional breakfast. The concept of service apartments. . The concept of service apartments offers a cost advantage and a longer term commitment. nonresident Indians visiting the country for long spells. both from the service provider/receiver’s perspective.BUDGET HOTELS 37 __________________________________________________________________ The cost effectiveness of service apartments is making them second home for expatriates and business executives on the move. So we will provide a big refrigerator. mainly in the commercial and financial districts of metropolitan cities. and store food. heat packaged food. Service apartments are the latest trend in accommodation. both mid-level and senior management level business executives. With most apartment hotels strategically located in the city centre. service apartments are a natural choice for corporate employees or expatriates relocating to a particular city. microwave and toaster. people renovating their homes and of course foreigners visiting the city for long durations.

with multinational hospitality organizations like Accor with Ibis.BUDGET HOTELS 38 __________________________________________________________________ CONCLUSION After completing this project I feel that there is lot of scope and openings in this large and every growing sector of hospitality. Many companies are setting up new budget hotels establishing chains. The economical price of these hotels is giving the people value for money and encouraging them to use these hotels for business trips and leisure trips. indiOne is going to launch 60 such hotels in the next five years. International players are also coming in with join ventures. The government is also taking initiatives for the growth of tourism and the torisism of India growing this will surely effect the hotel industry in a good way. creating revenues for the government. The concept of branded budget hotels is entering India. The future belongs to these budget hotels which are going to give other type of hotels a tough time. The government has also increased the foreign direct investment limit to 100 per cent in hotels. As many metros still are short of rooms budget hotels is and will be the right way to fill the gap of excessive demand. there is a room for growth of this type of hotels. they are increasing employment. Budget hotels are very economical to a middle class person. BIBLOGRAPHY Internet and Websites: .

com Books and Reports • Business World – June 2005 • Crisil Report on Hotels – May 2005 Mr.lemontreehotels. Partha Chaterjee (Taj Group of Hotels) Annexure I Indian Hotels Company unveils indiOne™ Redefines the hospitality industry with an innovative.tata.com www.indiainfoline.com www.com www.BUDGET HOTELS 39 __________________________________________________________________ • • • • • www.com www. first-of-its-kind of ‘Smart . Suri (Secretary General – FHRAI) Mr.indione.rediff.

comfortable beds. while providing an extremely comfortable. mini-fridge. The first hotel in Bangalore has 101 well-appointed rooms. The design of the hotel. 24-hour reception. twin and queen-sized rooms. “Last year. tourists. Developed in association with renowned corporate strategy thinker. the Indian Hotels Company Ltd (IHCL).” The indiOne™ hotels are modern. Indigenously designed and developed by IHCL. This spirit of innovation is evident through the indigenous development of indiOne and is a giant step forward for Indian Hotels. The rooms are individually airconditioned and provided with electronic locks. a work area. while giving a major fillip to Indian tourism and other ancillary industries. the indiOne™ hotels will create a new category in the domestic hospitality landscape. indiOne™ caters to corporate executives. We do believe that significant demand exists in the metros. 24 hours hot / cold water and toiletries. modular and scalable and will provide guests with a consistent experience. warmth. Speaking on the occasion. Mr Tata said. digital safe . today renewed its commitment to innovation with the unveiling of indiOne™. clean and safe stay at an affordable cost. the guiding principle behind the design was to create a unique ‘space’ that is conducive not only for guest comfort and relaxation but also for their work requirements. IHCL inaugurated the first indiOne™ hotel at Whitefield. The primary objective behind the launch of indiOne™ is to provide a superior product offering and consistent experience to travelers. It is only apt that we unveil this important initiative in a year when the Tata Group is paying tributes to the lives and times of J N Tata. the dynamics of the entire industry has changed and a category like the Smart Basic hotels has emerged as a compelling business opportunity. Mr Raymond Bickson. 2004 After a century of pioneering achievements in the Indian hospitality industry.BUDGET HOTELS 40 __________________________________________________________________ Basics’ Hotels June 25.” Priced at Rs 900 for a single room and Rs 950 for a double room. The 'Smart Basics' – a new category of hotels – signifies simplicity. from the rooms to the furniture and lighting systems. have been thoughtfully created to offer users a unique sense of welcome. IHCL said. “In the last few years. convenient hotel. Dr C K Prahalad. gymnasium facilities. a first-of-its-kind of ‘Smart Basics’ Hotels. style. direct-dial telephone including STD facility. convenience. J R D Tata and Naval Tata. wood laminate flooring. with a choice of single. far beyond the present offerings in the industry. secondary and tertiary cities across the country. Tata. the indiOne™ hotels are designed to be functional. chairman. Indian Hotels celebrated the centenary of its flagship hotel in Mumbai. managing director. Ratan N. without having to pay premium prices. pilgrims and leisure travelers who are looking for a clean. secure. an ATM. modernity and affordability. Unveiling the first indiOne™. informality. Bangalore. One of the challenges identified then was to innovate and to lead. tea / coffee maker. meeting room. a cyber café. a 17-inch flat screen colour television with satellite channels. traders and self-employed professionals. The indiOne™ hotel also has a restaurant.

an 80-room luxury service apartment facility. a first-of-its-kind of ‘Smart Basics’ hotels across the country. This new category augers well for the consumer. . the group expects that this segment will help in derisking its current revenue stream. as well as wi-fi connectivity in the public areas and individual rooms. This represents an important innovation from India in a traditional industry. not just for IHCL but also for the Indian industry. In the long run. empowering them with a unique and reliable choice. Incorporated in December 2003.” IHCL has conducted extensive qualitative and quantitative research on various aspects of a travellers needs.” Foreign tourist arrivals for the financial year 2003-04 increased by 2. service needs and expectations. “There has been a recovery in the travel and hospitality industry driven by growth in the economy and the fact that international travel increased by 18 per cent after three years of difficulty. RCL operates IndiOne™. The company has chalked out a capital expenditure of Rs 167 crore in the current year that includes renovating some of its properties. the group has secured management contracts for hotels in Mauritius and Kovalam in Kerala. The exhaustive research has culminated in the identification of the potential of a category of Smart Basics and the conceptualisation and design of indiOne™. co-creator of indiOne™. Roots Corporation Limited (RCL) is a wholly owned subsidiary of the Indian Hotels Company Limited (IHCL). the highest ever recorded for India.BUDGET HOTELS 41 __________________________________________________________________ deposit boxes. The research was primarily aimed at understanding travel patterns. Indian Hotels plans 60 budget hotels in 5 years Business Standard — August 10. in the last quarter of this year. The luxury division contributes 49 per cent to the Taj group’s revenues. said Tata group chairman Ratan Tata during the 103rd annual general meeting of Indian Hotels Company. owners of the Taj group of hotels. Adds Dr C K Prahalad. these will be far less prone to fluctuations than the luxury and upscale segments. It will be opening the Taj Wellington Mews. predominantly focusing on domestic clientele. “The launch of indiOne is a cause for celebration. Domestic tourism also increased by 15 per cent in the same period. As part of its growth strategy of following an asset light strategy.9 million. The company has invested Rs 240 crore for setting up the service apartments. Tata said. hotel usage. 100 per cent power back up. As these hotels will be catering to the economy segment. The group launched the first prototype in Bangalore in June under the brand name ‘Indione’. The increased economic momentum in India and globalisation of its businesses presents immense potential for a path-breaking hospitality offering like indiOne. 2004 Indian Hotels Company. is planning to open 55-60 smart basics hotels (budget hotels) in the next five years.

And besides building new hotels. Hyderabad International Convention Centre can accommodate 6. The size speaks for itself . is developing 30 projects." says Dave. All these hotels will have three star facilities. Pune and Mumbai. What's more. players are redoing old hotels and properties. a Taj project.spread over 2. The hotel industry is getting into all kinds of hotels . . where people postpone visits because of lack of accommodation. 2005 Staying in plush hotels will no longer be only for high-flying executives and the wealthy. So. which will have its first large conference. "The facilities there are mindboggling. is also high. and three-to-four star ones under the Mercure brand. the occupancy rates of over 70 per cent suggest that there is enough space for several new hotels to come up. is not restricting itself to three stars . According to Dave. Gurgaon and Jaipur will have one each with the former having over 215 rooms.under Sofitel and Novotel brands it is managing five-star category hotels. IndiOne. from the commercial town of Bangalore to holy places like Hardwar." says Uttam Dave. 'Pravashi Bharti' in December. plans to build 25 hotels under the brand Ibis in 12 years. Delhi-based InterGlobe Hotels. "The possibility of a turnaway factor. other companies like the Kamath's and Taj are also coming up with their budget hotels.BUDGET HOTELS 42 __________________________________________________________________ Check out these niche hotels Sangeeta Singh and Nanditta Chibber | November 05. demand is rising at around 15 per cent. For instance. several halls can be converted into large convention halls.from economy and budget to upwards of three stars. all of which means more style and comfortable stays for travellers. InterGlobe is also developing and managing an international standard convention centre in Hyderabad. To make the best of the opportunity. five of which are already under execution.000 persons. InterGlobe. however. partions can be created — this is something India has never seen. managing and leasing them.90. while Mumbai and Pune will see two Ibis hotels each of over 150 rooms. which is a joint venture between InterGlobe Enterprises and Accor Asia Pacific. Novotel Hotels are coming up in Gurgaon. Within a fraction of a second.000 sq feet. Besides. real estate developers are making attending conferences and seminars an experience to reckon with. president and CEO InterGlobe Hotels.

there is a lot of assured business in CBDs and increased inbound travel is facilitating that. Haveli Hari Ganga in Haridwar and the others tells a different story. business development feels that "we have reached a stage where we can manage the properties of our choice". cultural and spiritual destinations for the midmarket traveller." Will the government take this seriously? Leisure hotels Leisure Hotels is tapping natural. a luxury resort and Corbett Riverview Retreat . Chardham Camp in Uttranchal.are its premier brands." says Dave." Dave is clear. the Delhi Development Authority had two to three rounds of auctions of properties in Delhi. The company's core competency of managing and publicity has broadened its vision of expanding in managing properties for others. there were no takers. but because the rates were so crazy. and also maintaining and using them for tourists. "we want to pay market prices. others like InterGlobe are focussing on central business districts.BUDGET HOTELS 43 __________________________________________________________________ Not just that . "While inbound travel has grown by 25 per cent in the last two years. "Sometime back. While some hoteliers are getting into developing properties in IT parks. It has formulated the concept of developing and selling cottages at the Corbett Riverview Retreat. what does the hotel industry expect — prime land at discounted prices? "No. holy cities. With the success of their ventures. The company's getaways in Corbett . smaller industrial towns and national parks. its new venture will promote it as a river-dolphin viewing destination. Leisure Hotels targets niche segments of the leisure traveller to destinations where luxury resorts and hotels were previously not considered profitable. Vibhas Prasad.Corbett Hideway." says Dave. According to Dave. and unfortunately the government is not considering hotels a priority sector along with infrastructure and housing. the company today has 11 properties. the hotel industry is not growing at the same speed.companies are also waiting for the opening bids for the Commonwealth Games. but the procedure should be expedited. the government will see serious bidders only when rates are reasonable. Restoring a haveli in Uchagaon along the Ganga. But the success of The Himalayan View Retreat in Ramgarh. So. and as the company is now also managing properties. Started in 1989. According to Dave. Sarovar Hotels . director. to be held in 2010.

Managing Director. Hyderabad and Jaipur are on the cards with "a target of 50 hometels in the next 7-10 years". and now it has launched Sarovar Premier. The domestic tourism. limited service. If you remove the top end items like high valued marbles.our three-star. . rebranding it as Solluna Sarovar Premier. As any traveller. This percentage was increased by 23. At the Jim Corbett National Park. ideally speaking. telecommunication such as internet and telephones. Demand for budget hotels in India on the rise Publish Date : 10/4/2005 Source : Travel and Aviation News With a sharp rise in the number of tourists in India. which was about 308 million during the year 2003. registered increase of about 14 per cent during 2004.5 per cent in 2004. four-. The Park Plaza Royal Palms in Mumbai and The Promenade in Pondicherry are two recent additions in the business hospitality sector. Lemon Tree Hotel. no-frills brand." After the launch of the first one in Bangalore in November 2005. Mumbai. "says Patu Keswani. Sarovar Portico and Hometel brands as domestic brands. But it will incorporate all the features and facilities required by a business traveller. leisure and religious destinations. is a three-star or a four-star hotel with cheaper costs. managing director. the company is refurbishing the Solluna Resort. Pune. the demand for "Budget hotels" is turning desperate. I will need cleanliness. Anil Madhok's Sarovar Hotels are now a leading multi-brand hotel management company. According to Anil Madhok. encompassing five-. Gurgaon. woods in all the rooms and provide smaller rooms. and three-star categories respectively. Sarovar Hotels 'Park Inn' in Badrinath is one of the first ventures introducing four-star hospitality in pilgrimage destinations.3 per cent of tourists during the year 2003. Sarovar Hotels. "Future plans include developing of hometels . requirement of accommodation in budget category of hotels during the next five years has been estimated at about one lakh hotel rooms The country witnessed a growth of 14. franchises and markets 32 hospitality centres across business. Keeping in view the increasing trend of arrival of tourists to the country. Its affiliation with Carlson Worldwide continues under the Park Plaza and Park Inn brands. it will cut down the costs drastically. adds Madhok. Sarovar Hotels manages. good quick service.BUDGET HOTELS 44 __________________________________________________________________ Started in 1991. "A budget hotel. hygiene. I would also look for good and quality food.

Not just business travellers but also families who come on vacation are happy to go with this option.Kundu. Lemon Tree Hotel. whichever is less. the Ministry of Tourism (MoT) is leasing out Government lands to the private sector units. "An organisation has different departments. 2004 ." says B. Rs. Managing Director. (ANI) Lemon Tree to grow in other cities Maitreyee Handique | September 17. "I would prefer a budget hotel because one can eat to one's satisfaction at cheaper rate." says Cyrus Madan. Kolkata and Chennai. which is at the lower end of the deluxe hotels and at the upper end of the guest houses.star. facilities and levels of comfort you would expect from a five-star hotel. The staff at lower-management-level are the people that generally prefers these hotels. Rs. We don't invest in any hotel unit where we are not guaranteed on the 18 per cent return of investment. 75 lakh to 3-star and the Heritage Basic category project. But still the higher officials prefer to go to the five star hotels. Establishment of nation-wide internationally-branded economy hotel network will fill a major void in the Indian hospitality sector.BUDGET HOTELS 45 __________________________________________________________________ India is certainly the fastest growing travel market. the capital subsidy is granted to newly approved hotel project in 1-star to 3-star and Heritage Basic categories in the country except the four metropolitan cities-. Mumbai. At the same time maintain the meticulous standards required by the travel and tour operators worldwide. the Ministry of Tourism. the budget hoteliers are targeting the group. With a view to streamlining the scheme to provide subsidy to the budget hotels.P. The incentive is in the form of capital grant of 10 per cent of the total principal loan taken from designated financial institutions or up to Rs. Deputy General Manager (Operations). Accor and Inter Continental are also establishing budget brands across the country. leading Indian and international hotel chains like Marriott. These hotels promise all of the amenities. For setting up of over 100 budget hotels in the country. "Fifty per cent GOP is what we operate on and we guarantee an 18 per cent return on investment. in a deluxe hotel one has to pay minimum 3. Not all the staff members are designated to senior-level positions. Hotel Royal Castel. 50 lakh to 2. 25 lakh to 1-star. So we have a very high profit-making venture and that is why we are in this business. Government of India has introduced a scheme "incentive to accommodation infrastructure"." says Sunil Verma. Otherwise. a customer of a budget hotel.000 rupees in this regard. Similarly.Delhi. Under this scheme. At present. Hilton.

"Our target is to achieve at least 50 per cent operating profit every year.a 100-room hotel in Pune. Choice Hospitality (Clarion). In Jaipur." says Keswani. Lemon Tree may come up on the top floor of a shopping mall. "Both Pune and Chennai are the fastest growing software centres. after the no-frill airlines wave. a 160-room hotel in Chennai and another 45room hotel in Gurgaon -. Patu Keswani. the Tatas (IndiOne. Besides. The company will also look at Vadodara and Surat. adding that 40 per cent of its business clients have previously stayed at five-star hotels.all at a cost of Rs 65 crore (Rs 650 million). The Chennai property is similarly located close to the software Tidel Park I. it is the budget segment in the hospitality industry that is growing rapidly. the hotel is also beginning to understand the habits of domestic consumers. Apart from Lemon Tree." says Keswani. with its first property fully operational. . Taj Residency) and the Oberois (Trident). says they are negotiating to have a presence in Bangalore. more players are likely to enter the market. But Keswani isn't worried. Krizm Hotel is promoted by 40 private equity investors." With its aim of remaining within two kilometre of any business centre.BUDGET HOTELS 46 __________________________________________________________________ After setting up the first 49-room Lemon Tree hotel in Gurgaon in June this year. The three properties will be ready within one-and-a-half years. Clearly. "With competition." says Keswani. customers will be able to gauge for themselves what our product stands for. "Our preliminary assessment report shows that there is a demand for the Lemon Tree product in these cities. Jaipur and Chandigarh. the company has bought its Pune property in the Rajiv Gandhi Infotech Park. others in the segment are Sarovar Park Hotels and Resort Ltd (Hometel). managing director of Krizm Hotels. Delhi-based Krizm Hotels (Pvt) Ltd is ready to develop three more business budget properties -. Hyderabad. In keeping with the company's target of opening 25 hotels in seven years. But with the demand for budget hotels growing three to five times more than the leisure five-star hotels.

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