Over the past few years, hospitality in India has seen the budget-hotel

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

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

Image: Shutterstock

While the impact that these businesses have had on the industry is
impressive, this is just the beginning, and well begun is still only half
done. To take their business to the next level, these brands need to
implement stringent quality standards and focus on the guest
experience.
These brands today have a lot in common with the dedicated
aggregators; in fact, MakeMyTrip has gone the extra mile, creating a
dedicated Value+ category to go head-to-head with these new age-
brands. In the case of aggregators like Best Western or Choice, the
properties carry a signature of their branding – making it necessary to
maintain the quality of experience guaranteed by this branding.
Prioritising this guest experience becomes a critical component of this
model.

The guest’s journey actually begins the moment he or she starts

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

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

Because there is no standardised routine to ensure this in an

independent budget hotel, the quality of the guest’s visit is put at risk –
this is what these brands have to overcome. Reservations can get
mixed up, double-bookings can occur, room availability may be
misinterpreted and guests may need to be accommodated at other
properties. These issues can severely hamper the growth of this
segment as a whole. Without end-to-end automation, the odds of a
catastrophic mix-up escalate rapidly along with the hotel’s own
growth. My guesstimate tells me that the percentage of hotels
encountering the above-mentioned problems should easily be in
double digits.

When such a high level of deficiency exists, it complicates matters for

demand generators, who then have to organise manual checks and
follow-ups to oversee the management. This is unchartered work for
them and negatively impacts their bottom-line at the end of the day.
Moreover, with room prices starting from just Rs.999, the
commissions that these demand generators earn would be as little as
Rs.200! With margins this low, the additional overhead costs that
come with maintaining consistency can severely inhibit the model’s
profitability.

Without a certain degree of control over the properties being listed,

establishing consistency can become a real challenge as most of
these properties have no comprehensive processes to ensure clean
rooms, washed linen, replenished toiletries and so on. We owe it to
the buyer to provide everything that is promised during the sale, and
given the existing infrastructure, resource base and automation levels
of these suppliers, it is almost impossible to fulfil this promise. Having
said that, the demand generators cannot be expected to monitor each
and every guest-cycle either as it will affect their long-term economic
stability. There is an overwhelming need for a solution that allows the
properties to monitor their own operations effectively, while also
simplifying communication between the supplier and the
brand/demand generator. This is what the demand generators can do
– focus on supplier-side technology.

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

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

We are already seeing these companies target the South-East Asia

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

The concept of a budget hotel has changed the country’s hospitality industry.
Being a country with a population in billions, people grasp every opportunity
and blend it with ideas of their own to their advantage.

Previously, people mostly used to visit places where they have relatives.
However, that has altered over the years. Now, other than families, couples,
friends and solo travellers travel very frequently. Efficiency will be the
mantra for the coming years. A rise in domestic tourism resulted in
individuals to convert their homes, apartments and look-alikes into hotels.
They are cheap but come with many compromises. Since they are not
designed to be hotels, several of these buildings are not even fire-compliant
and many a time they are entirely illegal. But customers don’t know about all
these because they avail online bookings nowadays. The rapid yet random
emergence of hotels has also led to a supply shock in the sector and it will
take some time to cool down. Until things stabilize, this imbalance in the
demand and supply quotient will continue to persist.

Keshav Baljee, the Managing Director of Spree Hotels and owner of Royal
Orchid hotels from his more than a decade’s experience in the hotel industry,
points out that the situation was very different a few years back, especially
when internet and smartphones were not in everyone’s hands. “You couldn’t
discover the non-hotels before. Earlier hospitality meant only hotels. But
now it includes home stays, serviced apartments and guest houses.
Staycations have also started.” he says.

In a discussion with Entrepreneur India, Baljee elaborates more about the

altered picture of the hospitality industry and its potentials.

Rise in the Domestic Hospitality Sector

Technology has been the biggest disruptor in the industry. Technology is

powering all hotel bookings. With the emergence of smartphones and rise in
the availability of the internet, online travel agents have come to the fore with
their apps and websites. They are the actual disruptors of the industry. “Now,
you just don’t enter a hotel and say, ‘Hi! I want to book a hotel room,’ ”states
Baljee.

It has reduced the requirement of manpower and cost and in turn, increased
efficiency. Positively, they have allowed a lot of people to make hassle-free
bookings from anywhere and anytime. Comparing with the previous
scenario, Baljee recalls, “There was a time when you had to make bookings
by calling the hotels directly and you had to visit travel agents for every
booking. This has also reduced the frictions in hotel bookings, meeting travel
agents, waiting for a day or two only to get your booking confirmed. But as
we have gone online it has become convenient, seamless and instantaneous.”

The second factor that has also assisted in the enhancement of the sector is
that the customers now are very price sensitive as they can now easily check
and compare prices online. 10-12 years before discounts were not much of an
option, but now it has become widely prevalent everywhere. There are now
so many non-hotels competing with the actual hotels that price competition
has also increased. It has been a boon for the tourists and has eroded a lot of
the profit margins for the hotel industry.

The recent years have seen a rise in hyper-funded venture start-ups. These
hyper-funded VC-backed companies are obviously giving cash back and
discounts. There are wallets and tie-ups for which the customers get
discounts and this also stimulate certain amounts of demands. Discussing the
price-sensitivity, he highlights, “It is undoubtedly creating quite a bit of
demand but at the same time, customers get unrealistic ideas and they think
for INR 699 or 799 they will get hot water, sumptuous meal, wifi, etc. But
they don’t understand that at this price the actual hotels cannot offer anything
because it is lower than the running costs of the hotels.”

Adding to the competitive distress of price, he says, “But hotels can’t

compromise on the costs. So, we figured that unless we are significantly
reducing the expenses behind employees, HR, electricity, water, rent, real
estate, we can’t do anything. But some of them are very sticky and is very
difficult to fix.”

However, as every hiccup has a solution, he indicated that there are some
“cool innovations” going on, where hotels have condensed many of the
operating costs to stay competitive in the market.

A Skillful Construction of the Hospitality Industry will Also Help in

Nation-building

The hospitality industry is very much reliant on tourism. India has all the
necessary elements that are required for thriving tourism industry. It has
historical places, beaches, mountains and forests, everything that’s needed to
scale up tourism. Yet the country’s tourism story has a long way to go.
Although in the domestic front the industry has grown, when it comes to
foreigners visiting the country, it will need certain restructuring. “Tourism in
India is ready to serve kind of industry. We have countless tourist places,
buildings and monuments. The industry has survived some serious blows like
a recession, slow down, a spike in oil prices; yet it has marched on. The
industry needs a bigger nudge.” Baljee points out.

What he sees, there is the need of some sort of government supported

manpower training. Talking about the need of the hour, he states, “I would
argue hospitality can be the largest industry manpower sort of industry in this
country. We need a stable source of manpower. As much training and team
building, what we are doing it is insufficient.

All we need right now is manpower because massive wage inflation is going
on and we are unable to retain them because all the trained personnel go to
retail, airlines, BPO, etc.”

He sees the country’s soaring population not as a problem but as an

opportunity. Population in billions means billions of probable entrepreneurs,
who can adopt the right model and strategy to enter the sector and upgrade it.
Then the whole scenario can be revamped merely in a few years. And,
finally, with the hoteliers arranging the most reliable, consistent hotel
experience for the guests, the hotels will be able to build a strong band of
loyal customers, who won’t think twice to come back again and again even
when a hotel has a comparatively higher price. “Promise getting delivered is
the most essential element customers look for and that earns loyalty,” Baljee
concludes.
Funding Rounds
Number of Funding Rounds 4
Total Funding Amount $35.3M
Fabhotels has raised a total of $35.3M in funding over 4 rounds. Their latest funding was raised on Apr 7,
2018 from a Corporate Round round.
Which funding types raised the most money?HIDE
Funding Rounds
Number of Funding Rounds 4
Total Funding Amount $35.3M
Fabhotels has raised a total of $35.3M in funding over 4 rounds. Their latest funding was raised on Apr 7,
2018 from a Corporate Round round.
Which funding types raised the most money?HIDE