Ever since Indian middle class started travelling for leisure or official purpose, Budget mid-segment hotels have seen an exponential growth. Rakesh kumar explores this affordable yet convenient places of stay
Prem Kumar, a corporate executive based in Delhi, has to travel a lot these days for official purpose. Sometimes it is Mumbai or Bangalore but during each of his visits he spends at least two days attending meetings the whole day. Every visit, Kumar ensures booking a pocket-friendly hotel to stay. “It is not that I can’t afford big brands but why should I? The whole day I have to spend in meeting or presentation and by the time I get free it is night. Then I am tired and just want to sleep. Why should I spend lavishly on a room just for bed and breakfast,” he pointed out.
Like Prem Kumar, there are many multi-national employees or leisure travellers in India, who share the same thoughts. Perhaps this is the reason, these budget hotel chains are growing day by day. In fat, several luxury hotel chains are jumping into the budget segment, like Lemon Tree, Hotel Inn, Sarover Hotels and Fortune Park from ITC group. Usually, these hotels start their booking with fares as low as Rs 1,500-5000. They offer clean rooms along with all the basic facilities.
Even data speaks in their favour. The latest report by Hotelivate, by analysing over 1,000 domestic hotels, shows how three-star hotels saw the highest RevPAR (revenue per available room) growth of 8.2 per cent among all segments in 2017-18. The data collated by the hospitality consulting firm shows the two-star hotels registered a RevPAR growth of 7 per cent, thanks to a rise in travel in Tier II and III cities and towns and the expansion of budget hotel brands. Therefore, this segment is not only attracting business travellers but also holiday makers. “It is not like that only office goers are coming to check into these hotels. In other places like resorts, many families come here to spend their vacation,” informed Mirinal Sarkar, Sarovar Grand Hometel, Mumbai.
Sounding similar opinion, Anita Marwah, a government teacher informed that she always prefers booking budget hotels as they are clean and hygienic and don’t burn a hole in the pocket. “Holiday means visiting different places or sightseeing. Why should we unnecessarily spend on hotel amenities,” said Anita Marwah, who confides that she prefers these hotels.
In simple language, Budget hotels are meant for those people, who are low on a budget or have to watch their pocket while travelling. Therefore, it is considered as the lowest category of the hotel segment that provide rooms and meals cheap along with basic requirements such as daily room service, telephone, television, air conditioning, mineral water and broadband connection. Even their staff has limited customer service skills or one staff doing multiple tasks. Many of them have no restaurants or if there is one, it serves Continental breakfast. It won’t have 24/7 laundry or dry cleaning service, butler service and may not have facilities of spa or swimming pool. Nothing fancy!
“Budget hotels were established targeting the middle income corporate or leisure traveller. You can consider these as the Indigo of the hotel world, where a customer only pays for what he wants. Good sleep, the right temperature, hot and cold water, clean linen and WiFi. Traditional hotels have large lobbies, large restaurants, open spaces, most of which are non revenue generating and require a high maintenance cost. Therefore, they need to charge higher for the room,” said Anant Kumar, director, 1589 hotels.
However, gone are the days when Budget hotels were the first choice for only people with low budget, now everyone seems to be interested in this segment. There are a number of people, like middle income group, government employees, PSUs and lower or medium level executives in the private sector, students, freelancers and small entrepreneurs who use Budget hotels. At the same time, senior citizens and religious travellers, who mostly travel in groups, prefer Budget hotels. Also backpackers and expats, who come to visit India either on personal or college tours, love staying in these hotels. “Leave alone the ultra uber rich, these days everyone is looking for Budget hotels. Why shouldn’t they as it has all the basic facilities one requires. There are many travellers who don’t need a bar or spa or high-end restaurants,” said Mrinal Sarkar.
Another advantage of these Budget hotels is their location. Most of them are situated at key locations that are city-centric, making them an ideal place to stay for both business and leisure guests alike, providing comfort and value-for-money accommodation. “Our Leisure Inn brand operates in the Budget segment and encapsulates what guests want and deserve from a quality and effortless hotel experience, including comfortable rooms, great F and B options, modern facilities and excellent customer service, which can be matched to four-star hotels,” said Rohit Vig (Regional Managing Director (India) and Director Development, StayWell Hospitality Group.
“Budget hotels are gaining popularity among single travellers, mid-management level executives, transit guests and families. Corporates are the major segment in these hotels as they spend their day outside at work and evening they are back in the hotel to use the facilities in a safe and comfortable atmosphere,” said Nabendu Acharjee, General Manager of Hometel Chandigarh.
A research by RedSeer Research cites that mid-segment hotel market in India is growing at an average 17 per cent annually. With this growth, the future of the industry seems to be quite promising, this is what experts and industry players cite. “With the growing demand for branded Budget hotels, I am quite confident this segment will grow further with both new and existing players,” informed Rohit Vig, StayWell Hospitality Group (Regional Managing Director (India) and Director Development.
While Nabendu Acharjee shares that there was a time when every hotel chain was investing largely in the luxury hotels, but the operators have realised that these hotels are white elephants and cost huge amount to maintain and service guests. “The returns on the investment are very long and thus needs a lot of patience. These hotels are iconic and image boosters. However, the Budget and upper upscale or upscale are the two categories where the maximum action happens. They generate good revenue for hotels and drive reputation as well at a controlled operational expense.”
These market statistics really boosted the market players and they are adding more and more rooms to their inventory. At the same time, greater influx of international travellers and domestic travellers is also driving the mid-segment or Budget segments as they prefer affordable yet safe accommodation.
Currently, Lemon Tree has a target of 3,000 rooms across India at 29 properties in its pipeline till 2021, while Ginger Hotels hopes to have 100 hotels in its portfolio by 2022. In its report, RedSeer says a major chunk of their property will be at leisure locations. It means they are not in every sector.
“Travel is an expensive hobby but Budget hotels make it accessible to all. This is very beneficial for students or young corporate goers, who are tight on their budgets, but want to experience life,” said Anant Kumar, Director, 1589 hotels.
The shift in focus from luxury hotels to mid-market Budget hotels in the last few years and the emergence of middle class in the economy with disposal income, and appetite for travel for leisure have also created demand for quality affordable accommodation in the country. “There has 0been increase in both national and international leisure travellers. The bulk of India’s leisure spending was on domestic travel, at 87 per cent. The remaining 13 per cent came from the international leisure traveller. This has led to an increasing demand in the mid-segment category of hotels in India,” informed Vilas Pawar, CEO, Choice Hotels India.
Cygnett Hotels is one of the fast growing hotel groups in India. It has a presence in all three segments ~ luxury, mid and Budget. Recently, it completed 10 years in the market. Their goal is to add 1800+ Keys by 2020 and to manage and franchise at least 100+ Hotels ~ 5,000 Keys by 2022. A conversation with the director revealed many facets of Indian hotel industry:
You are in upscale, mid-segment and Budget. Of the three, which shows the most promise?
Mid-Segment and Budget are the most promising. With rise in disposable income, people are travelling more. These segments are perfect to cater to this segment of our guests. Sixty per cent of our properties are mid-market.
Do brands have better chance of success than standalone economy hotels? If so, why?
Indian travellers have steered away from unbranded, unorganised, low service accommodations ~ which was the norm for decades. This changed mindset is creating a huge opportunity for hotels that provide quality service at affordable rates. Whether it’s a travelling executive needing a basic clean place to stay, along with delectable meals and a gym, or a corporate businessman, who wishes to host a conference in an upscale hotel with a business centre with audio/video conferencing facilities, or a family needing a reliable budget space just for a vacation, or organising a wedding with support for the zillion small things needed at a lifetime event, or relocating executives needing economical fully-serviced spaces for an extended duration, Cygnett provides stellar spaces tailored for each guest segment served with its unique ‘Cygnetture’ experience.
What are your India expansion plans? How many keys by the end of this year?
Cygnett is a brand that is rapidly expanding its presence in India. Majority of our operations are in Tier II and III cities. We focus on this segment because these markets miss the presence of branded chain. Our plan is to capture as many cities in this segment. Parallelly, we are increasing our presence in Tier I and Metro cities. Since we have already evaluated the market, we are all set to develop business. We at Cygnett acknowledge the untouched beauty of the North-East. We have a presence in two of the seven sisters of India, by having operations running in Bongaigaon and Guwahati. Cygnett will also cover a milestone by launching a hotel in Gangtok, Sikkim, before the end of this year. Tinsukia, Dibrugarh and Yang Yang are also in our pipeline. We are targeting to operate 1500+ keys by the end of this year. Development of boutique wellness luxury resorts is also in our pipeline.
Has the economic slowdown in India hit the hospitality industry hard? If yes, what would the fallout be?
There is a deceleration in the pace of hospitality sector. Earlier there was a gap between the demand and supply with demand scaling higher than supply. Now, it is expected to break even. Natural calamities such as heavy rains and floods have also barred the tourism flow. However, it is true that the industry is not picking up pace in terms of ADR as compared to global markets.
What should the government do in terms of policies to help the industry?
Government is anyways promoting tourism in the country. With schemes likes UDAN and others, it is encouraging the people to travel more by increasing connectivity across various states and cities. Emphasis on infrastructural development, clearances and connectivity between regions can help the industry grow.