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.

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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 to 6mn by 2010 and to 10mn by 2020.BUDGET HOTELS __________________________________________________________________ 5 Tourist arrivals projected to grow at 6. Tensions on border and travel advisories issued by western nations also affect the hotel industry.5% CAGR until 2010 According to World Tourism Organization [WTO] foreign tourist arrivals in the country are expected to witness a 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. 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. General economic conditions and recession in the economy affects business travel and hence demand for rooms in the hotel industry. The hotel industry typically passes through phases of low occupancies – when are unable to cover fixed costs and incur losses. 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.

and amenities provided.BUDGET HOTELS __________________________________________________________________ 6 CLASSIFICATION OF HOTELS On the basis of Star Categorization Like most of the countries in world. and accommodation options.  Five Star Hotels These are top of the line hotels located mostly in the big cities. India also has hotels divided in different categories depending on their location. All the star hotels in India are government approved with continuous control on the quality of services offered. infrastructure. These hotels provide all the modern facilities for accommodation and recreation matching international standards in hospitality. and Goa.  Five Star Deluxe Hotels The most luxurious and conveniently located hotels in India are grouped under Five Star Deluxe Hotel Category. Five Star Deluxe hotels in India are globally competitive in the quality of service provided.  Four Star Hotels A rank below five star hotels. 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. Four star hotels provide all the modern amenities to the travelers with a limited budget. Quality of the services is almost as high as the five stars and above categories. 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. . Agra. These hotels are located primarily in metropolitan cities like New Delhi and Mumbai and major tourist destinations like Jaipur. facilities offered. facilities.

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

Located at the outskirts of city could be from premium to budget category Budget segment Heritage Hotels Resorts and Clubs . Comprises of palaces. havelis and forts being converted into hotels. Account for nearly 30 per cent of the room base.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. It involves effective preservation with commercial capability. Comprises of 4 to 1 star hotels catering to average and domestic leisure travellers. Generally found in smaller towns and cities.

Bharat Hotels and Hotel Leela venture. The main foreign players in India catering to the premium segment include Hyatt and Le Meridian. hotels in the budget segment charge Rs. The main domestic players catering to the premium segment include Asian Hotels. 80-85 per cent of hotels in the budget segment are branded. The average cost for setting up a budget hotel (80-100 rooms) ranges from Rs 3 – 5 million per room.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. Most major hotel companies in India have that brands that cater only to the budget segment. while in India only 15 per cent of budget hotels are branded. In the medium to long term. In case of other domestic players such as East India Hotels. In case of other foreign players such as Marriot.200 – 3. 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). According to industry sources internationally. Most hotel chains have a presence across segments with the aim of catering to a wider market. 10 million for a hotel in the premium segment . over 65 per cent of the total rooms were in the premium segment.000 per room. On an average. 1. as against Rs. Premium Segment Some hotel companies have brands catering only to the premium segment. Budget Segment Most of the budget hotels in India are independently owned and are not branded. over 75 per cent of the total rooms were in the premium segment. per day. ITC Welcome group and the park hotel.

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. All hotels below 4 star categories are lumped together as budget accommodation. as also in other countries. This is the commonly accepted definition in the industry and the media.000 to 500.BUDGET HOTELS 10 __________________________________________________________________ INTRODUCTION TO BUDGET HOTELS There is no clear definition of budget hotels in India. Considering that hotels are a good business. . according to FHRAI reports. Thus about 70% of hotels in the country in the approved and classified category are accounted for by the budget hotels. Government of India. chains and other investors are increasing their investment in this sector. 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. The average room rate (ARR) realised from business travelers is normally higher than from leisure travel.03. the Federation of Hotels and Restaurants Associations of India (FHRAI) reportedly comes from the business travel segment. As per published statistics of Ministry of Tourism.000 hotel rooms in the country in the unapproved category and all of them will be in the budget category. There will be another approximately 400.720 hotel rooms in all the approved and classified hotels in India in 2003. there is a heightened activity in construction of new hotels during the last 2 years. there were 91. 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. All interested hotel companies. 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 . 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. this is a part of regular activity and there are a lot of budget hotels under construction.

This is the position in all countries. . whether they are for business or leisure.BUDGET HOTELS 11 __________________________________________________________________ Majority of domestic travelers. The number of travelers and the hotel rooms are therefore much more in the lower category 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. It is thus certain that demand for budget hotels will continue to grow and at a much higher rate than the 5 star hotels. About 25% of foreign leisure travelers also stay in budget hotels.5 million foreign tourists in 2004. 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. are targets for the budget hotels. there are about 300 million tourists or tourist trips annually by domestic travelers compared to 3. According to Government statistics.

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

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

the occupancy is between 30 and 78 per cent. 1000. Global Hospitality majors like Accor Choice Hotels and Microtel are also getting in. Indian hotels spun off Roots Corporation. while Fortune chain has a mix of hotels – 4-stars and low priced hotels – depending on the cities they operate in. This was the accumulation of Indian Hotels five –year . 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. As many as six new chains are waiting in the wings. . Likewise. 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. a separate fir to set up indiOne. Almost a year old. 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. Besides indiOne. 1000 a day. Even indiOne was unveiled in Bangalore which is owned by Indian Hotels. Accor is bringing its Ibis chain here. Next in line is Sarovar Park Plaza’s Hometel chain with its proprietary coming up in Bangalore. The conceptualisation of indiOne was different from that of a Taj Hotel. The budget hotel is a good business proposition. morphed into a four star and lowpriced hotel. however. Attempts in the past by the major players to carve out budget hotels.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.old project to develop a hotel which would deliver value at Rs. this is the only chain pegging tariffs below Rs. The Taj Group had launched the gateway chain at a slightly higher price bracket than its indiOne brand. indiOne operates at near full capacity. Then the Oberoi and the ITC welcome group had positioned their Trident and Fortune Hotels as Budget Hotels. 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.

whether they are for business or leisure. 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. 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. 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. About 25 percent of the foreign leisure travelers also stay in budget hotels. It is thus certain that demand for budget hotels will continue to grow and at a much higher rate than 5-star hotels.BUDGET HOTELS 15 __________________________________________________________________ TARGET AUDIENCE Majority of domestic travelers. The number of travelers and the hotel rooms are therefore much more in the lower category. 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.

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. Other supplementary products also include travel arrangements. airport pick-ups etc. 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 hotels various other departments like the house keeping. food and beverage. front office. room service and maintenance. providing a room along with bed to sleep. all provide the supplementary services to the customer Budget hotels.BUDGET HOTELS 16 __________________________________________________________________ SERVICES AND FACILITIES The accommodation includes. For example they may have a self service restaurant. close circuit TV Credit cards acceptance Electronic locks Complimentary Airport pickups Secure Parking Day Care Centre Pub Business Center Wireless Internet Facility .

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

indiOne’s restaurant offer simple meals doing away with food dishes that need costly ingredients and equipment. 10 crores cost.200 1. there is a feeling that instead of a sub – Rs 1.800 – 2.950 ROOM TARRIFS (Rupees) THE COST EQUATION . Typically room charges are fixed at one thousandth of the project cost. So for a hundred room hotel with a Rs. Though indiOne is faring very well in Bangalore. the sub . Square Meal. 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 works. Another Manpower – heavy area is Food and Beverages.500 900. There are no Menu cards either.BUDGET HOTELS 18 __________________________________________________________________ per cent of its services has worked out a smart alternative.800 for Delhi 1. 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 ) 1.800 1.000 – Differential pricing across cities 1.000 – 1. So reducing it to a cafeteria minimizes staffing requirements.500 – 1. but the moment the cost goes up the project becomes unsustainable. 1. The hotel has promoted Black Fox Security management in which Lemon Tree has 50 per cent stake and an expert runs the company. If a menu card is there it would mean committing to offer all dishes at all times.000 price point.200 1.800 – 2500 1. a differential pricing system depending on the city would work better.Rs.

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

The Debt Factor Another critical element to be factored into project cost is the servicing of the debt taken to build the hotel. and then comes the interior. Hoteliers must not view owning hotels as part of their core competency for too long.e./Room) INDUSTRY COSTS . A luxury hotel could be built at anywhere between Rs 25 lakh to Rs 100 lakh a room. Hotel developers are considerably better placed to own hotels because they are able to price in all costs.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. It is their business. i. For budget hotels. that price is considerably lower as specifications are not as significant. Stressing on the need to reduce credit servicing pressure for new projects. the civil structure which is built of steel or is a reinforced concrete structure. 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. Debt is very critical in the capital mix. of which the first one is relatively simple. 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. The emphasis is on basic functionality which is what the guest pays for. 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.

marketing Property and taxes Insurance Variable costs include • • • Room expenses. F & B costs. Fixed costs include • • • Administrative and general expenses (a small portion is variable). Employee Costs .BUDGET HOTELS 21 __________________________________________________________________ Operating Costs The expenditure incurred by hotels can be divided into two broad categories – fixed and variable costs. 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. light and power costs. The key expenses incurred in operating a budget hotel are employee costs. fuel. 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.

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

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

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

Marketing Alliances Hotel properties/chains are often associated with marketing alliances. travel agents altered their fee structure and have been charging a fixed fee for the services rendered. Internet The use of the internet in making hotel reservations has increased due to increased internet penetration and cost effective access. 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.1990s. Major marketing alliances include leading hotels of the world. in the US. For instance. Such fee – based travel agents differ from commission based travel agents. and direct negotiations with consumers. promotion and internet coverage. . These alliances provide the hotel direct access to reservation network. In addition commissions were reduced and a commission on ceiling was introduced. Hence. as airlines and hotels sold their products directly to consumers through the Internet. leading small hotels of the world and airline tie-ups. Other alliances include small luxury hotels of the world. profits of travel agents were adversely affected. Airline tie-ups Hotels also have promotional tie –ups with airlines. hotels could provide free accommodation for points accumulated under the frequent flyers schemes of air lines. and are known as travel management companies.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.

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 . 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.

Branded budget hotels such as indiOne and Lemon Tree use promotions more than unbranded budget hotels. 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. Discount coupons REGULATORY AUTHORITES AND TAXES . Budget hotels rely less on promotions as their aim is to give rooms at economical rates. promotions add up to the cost which will effect the price hence budget hotels use minimal 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.

gas tank Cold storage Music in lobby and other areas Sanction of water supply. 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 . electricity.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. local development authority and land ceiling authority Clearance and approval of plans of site Urban arts commission Taxes . Electricity Board. oil storage.

Service tax % (Feb 05) 8. 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 0-12.8 8-25 0-20 8. sales tax and turnover tax on food and beverages.5 1-10.2 10.2 1-20 0-8.0 - SOME PLAYERS IN THE INDUSTRY HOTEL KUMARIA PRESIDENCY .5 5 13 Sales Tax (%) 8.8 0-34.5-15 10 0-6 0-10 5-12.8-22 13.25 Turnover tax (%) 1.5 12-17.BUDGET HOTELS 29 __________________________________________________________________ The central government charges service tax to the hotel.8 0-8. The hotel collects this service tax from the people using the services on behalf of the government and further pays it to the government.0 10.5 0-20 9.5 4-32. dry-cleaning The state government charges luxury tax on rooms and.2 0-12 0-8 0-31.2 Banquets Conferences Health clubs.5-15 10 0-10 7.5 8 7.0 0-8.2-90 9.

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

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

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

Facilities at Hotel Airport International Striking décor. Airport transfers. 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) .T. from Bus Stand. Doctor on call. Telephone and C. from Domestic Airport. professional staff .BUDGET HOTELS 33 __________________________________________________________________ Location The Hotel is located 1/2 km. from Vile Parle Railway Station and 1 km. Laundry.V. Accommodation at Hotel Airport International Hotel Airport International has 28 air-conditioned Rooms which include 10 single rooms and 18 double rooms. 1 km. and E-mail.H/C running water. Services at Hotel Airport International Hotel Airport International offers Room service. Fax.

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 . recreation and entertainment facilities. The hotel's business center is equipped with a LASER jet B&W printer. a fitness center and a swimming pool (optional). a color printer. Service offerings will also include round the clock reception. Accommodation at Lemon Tree Hotels:The Lemon Tree Hotel.BUDGET HOTELS 34 __________________________________________________________________ Lemon Tree Hotel Located within Udyog Vihar offers between 50-120 high quality rooms (fully air conditioned. Udyog Vihar has 49 rooms. These are fully equipped to function as mini offices. housekeeping. photocopier and two individual workstations with Pentium 4 systems and TFT screens. a fully equipped business center with meeting rooms. with instant high speed net access. thermal binder. two telephone instruments. scanner.a multi-cuisine restaurant. 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 functional work table. refrigerator and running hot and cold water). conference room and board room.

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.

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

the concept is particularly popular with business travelers. 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. A service apartment is more spacious and is equipped with all the amenities that a long-staying guest needs. . nonresident Indians visiting the country for long spells. and store food. So we will provide a big refrigerator. Ideally suited for medium to long staying guests. microwave and toaster. people renovating their homes and of course foreigners visiting the city for long durations.BUDGET HOTELS 37 __________________________________________________________________ The cost effectiveness of service apartments is making them second home for expatriates and business executives on the move. mainly in the commercial and financial districts of metropolitan cities. Service apartments are the latest trend in accommodation. heat packaged food. With most apartment hotels strategically located in the city centre. The concept of service apartments. both mid-level and senior management level business executives. The concept of service apartments offers a cost advantage and a longer term commitment. both from the service provider/receiver’s perspective. offering the comfort and convenience of a home without the hassles of having to maintain or look after it. though a recent phenomenon in India. is an established global concept. service apartments are a natural choice for corporate employees or expatriates relocating to a particular city.

with multinational hospitality organizations like Accor with Ibis. they are increasing employment. 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. The future belongs to these budget hotels which are going to give other type of hotels a tough time.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. indiOne is going to launch 60 such hotels in the next five years. As many metros still are short of rooms budget hotels is and will be the right way to fill the gap of excessive demand. BIBLOGRAPHY Internet and Websites: . there is a room for growth of this type of hotels. 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. The government has also increased the foreign direct investment limit to 100 per cent in hotels. creating revenues for the government. International players are also coming in with join ventures. The concept of branded budget hotels is entering India. Budget hotels are very economical to a middle class person. Many companies are setting up new budget hotels establishing chains.

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

convenience. from the rooms to the furniture and lighting systems. 24-hour reception. style. convenient hotel. Mr Tata said. with a choice of single. Developed in association with renowned corporate strategy thinker. modular and scalable and will provide guests with a consistent experience. managing director. while giving a major fillip to Indian tourism and other ancillary industries. modernity and affordability.” Priced at Rs 900 for a single room and Rs 950 for a double room. traders and self-employed professionals. a work area. This spirit of innovation is evident through the indigenous development of indiOne and is a giant step forward for Indian Hotels. We do believe that significant demand exists in the metros. direct-dial telephone including STD facility. Ratan N. warmth.” The indiOne™ hotels are modern. mini-fridge. One of the challenges identified then was to innovate and to lead. “In the last few years. Mr Raymond Bickson. gymnasium facilities. clean and safe stay at an affordable cost. secure. the dynamics of the entire industry has changed and a category like the Smart Basic hotels has emerged as a compelling business opportunity. 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. indiOne™ caters to corporate executives. tourists. tea / coffee maker. wood laminate flooring. a cyber café. today renewed its commitment to innovation with the unveiling of indiOne™. chairman. Unveiling the first indiOne™. without having to pay premium prices. far beyond the present offerings in the industry. while providing an extremely comfortable. a first-of-its-kind of ‘Smart Basics’ Hotels. Dr C K Prahalad. comfortable beds. The 'Smart Basics' – a new category of hotels – signifies simplicity. Speaking on the occasion. J R D Tata and Naval Tata. the indiOne™ hotels are designed to be functional. digital safe . 24 hours hot / cold water and toiletries. the Indian Hotels Company Ltd (IHCL). 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 said. twin and queen-sized rooms. “Last year. a 17-inch flat screen colour television with satellite channels. The rooms are individually airconditioned and provided with electronic locks. informality. meeting room. have been thoughtfully created to offer users a unique sense of welcome. Indigenously designed and developed by IHCL. pilgrims and leisure travelers who are looking for a clean.BUDGET HOTELS 40 __________________________________________________________________ Basics’ Hotels June 25. Bangalore. The indiOne™ hotel also has a restaurant. an ATM. Tata. The primary objective behind the launch of indiOne™ is to provide a superior product offering and consistent experience to travelers. The first hotel in Bangalore has 101 well-appointed rooms. the indiOne™ hotels will create a new category in the domestic hospitality landscape. secondary and tertiary cities across the country. The design of the hotel. IHCL inaugurated the first indiOne™ hotel at Whitefield. 2004 After a century of pioneering achievements in the Indian hospitality industry. Indian Hotels celebrated the centenary of its flagship hotel in Mumbai.

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

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

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

The domestic tourism. At the Jim Corbett National Park. This percentage was increased by 23. Anil Madhok's Sarovar Hotels are now a leading multi-brand hotel management company. the company is refurbishing the Solluna Resort. Gurgaon. If you remove the top end items like high valued marbles. . woods in all the rooms and provide smaller rooms. I will need cleanliness. 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. Its affiliation with Carlson Worldwide continues under the Park Plaza and Park Inn brands. As any traveller. and three-star categories respectively. which was about 308 million during the year 2003. Keeping in view the increasing trend of arrival of tourists to the country. and now it has launched Sarovar Premier. telecommunication such as internet and telephones. Hyderabad and Jaipur are on the cards with "a target of 50 hometels in the next 7-10 years". leisure and religious destinations. Lemon Tree Hotel. limited service. franchises and markets 32 hospitality centres across business.BUDGET HOTELS 44 __________________________________________________________________ Started in 1991. I would also look for good and quality food. registered increase of about 14 per cent during 2004. good quick service. Sarovar Portico and Hometel brands as domestic brands. Sarovar Hotels. it will cut down the costs drastically." After the launch of the first one in Bangalore in November 2005. Pune. encompassing five-.our three-star. four-. But it will incorporate all the features and facilities required by a business traveller. ideally speaking. According to Anil Madhok. no-frills brand. rebranding it as Solluna Sarovar Premier. Managing Director.5 per cent in 2004. Sarovar Hotels 'Park Inn' in Badrinath is one of the first ventures introducing four-star hospitality in pilgrimage destinations. Sarovar Hotels manages. adds Madhok. "A budget hotel. is a three-star or a four-star hotel with cheaper costs. managing director. Mumbai. "Future plans include developing of hometels . the demand for "Budget hotels" is turning desperate. The Park Plaza Royal Palms in Mumbai and The Promenade in Pondicherry are two recent additions in the business hospitality sector. hygiene. 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. "says Patu Keswani.3 per cent of tourists during the year 2003.

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

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

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