March 2007




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First the low cost airlines and now the stripped down versions of luxury hotels. The rising Indian middle class is changing the dynamics of hospitality business... 

The clean rooms, complete with flat screen TV, come with basic amenities at affordable prices.


Every year during the Holi festival Praful Mehta, an Ahmedabad-based commodities trader, takes his family to the holy city of Haridwar to spend time in prayers. The routine is simple. Since Haridwar does not have luxury accommodation, he stays in a hotel in nearby Dehradun. After spending the day in Haridwar they go back to the Dehradun hotel.

But this year it is going to be different. Prafulís travel agent has told him that he need not make the two-hour back-and-forth Haridwar-Dehradun trip. He can check into a Taj-managed hotel in Haridwar. And at almost one-tenth the price of Hotel Taj!

The Indian Hotel Company, the holding company of Taj group of hotels, recently took a detour from the luxury path to launch Ginger, a chain of smart basic hotels.   Aimed at people like Praful Mehta who like to stay in good hotels that are not priced exorbitantly, Ginger promises to break new ground in India's hospitality sector with its smart properties with trimmed-down services.

Priced between Rs. 900 for a single room and Rs. 1175 for a double room, complete with a flat screen TV, Ginger hotel is an attempt by the Taj group to foray into the new category of budget hotels. 

Budget hotel is a new trend in the Indian hotel industry to capitalize on the growing tourism sector in India. It offers comfortable accommodation and hygienic food at affordable prices. Located in comparatively smaller cities like Haridwar and Indore, these hotels are reaching out to mid-level business travellers and tourists.

As spokesperson of Ginger hotels says, "The dynamics of the hospitality industry is changing and the demands and requirements of travellers are also undergoing a significant shift. The new travellers donít have problem carrying their luggage to their room if they get facilities like cyber cafť and ATM machines." 

Emerging Sector

As the number of business travellers surges and more and more Indians travel on holidays, other major players too are expected to make a bid for the emerging sector of stripped-down versions of luxury hotels.

Tourism experts say that there is a great demand for hotel rooms in more than 350 cities across India. Demand for rooms and average room rates are expected to grow by 15-20 per cent annually. There is no stopping the coming of budget hotels.

Though some experts doubt the future of budget hotel because of the soaring land prices that could dent their profitability; others argue that the time is just ripe for these hotels due to the growing requirement for low cost yet tidy hotels.

The Indian tourism industry has performed well over the last three years. Foreign tourists arrival in India has crossed the figure of three million. Even domestic tourism is witnessing an unprecedented boom with its size swelling to 230 million. The hotel industry is witnessing record occupancies and rising growth rates. 

In the next five years, the Indian hotel industry is expected to witness an acute shortage of rooms. The likely scenario will be a demand-supply imbalance that will lead to a dramatic rise in room rates. Companies that find rates prohibitive will be forced to look for more cost-effective alternatives. I-T majors like Infosys and Wipro are already developing accommodation at their complexes in Bangalore.

The mid-level business and personal traveller constitutes a key target market for most luxury hotels. The hotel industry feels that this segment will happily switch loyalties if it is offered neat and clean hotels with basic facilities.

Currently, domestic tourism is growing at the rate of 40 percent and a further accelerated growth is expected. Temple towns like Haridwar, Shirdi and Tirupati are fast becoming sought-after destinations for domestic tourists. But paying Rs.5000 or more for a room per night is not a viable option. Considering the fact that they mainly travel with their families, a room at around Rs.1000 a day seems more realistic for them.

In such a scenario, budget hotels like the Taj groupís Ginger chain that offer comfortable accommodation and quality service are gaining from the domestic and international travellers. These hotels are enabling the industry to achieve higher top line growth while its chain of five star hotels in the country and abroad drives the bottom line.

After the low-cost airlines, these budget hotels are responding to the aspirations of people like Praful Mehta who are all set to give their travelling streak a new tweak.



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