The Indian hotel sector is enjoying a period of strong growth off the back of rising domestic travel and an increased interest from overseas travellers.

This strong growth potential from India has not passed unnoticed by the larger international hotel chains, which are increasing investment and expansion plans within the country to capitalise on financial opportunities.

A recent report by CNBC highlighted that, ‘The Indian hotel industry is looking very good because the kind of growth expected over the next couple of years or more is to the tune of 15-20%'¹ Given these healthy growth projections, it is no wonder that the Indian hotel sector is undergoing a period of evolution and becoming an increasingly competitive environment.

The challenge associated with international hotel chains expanding their footprint into India is that the country has historically been a less competitive environment compared with other regions (like North America and much of Western Europe) and smaller independent hotel operators face real risks given that international hotel chains traditionally bring advanced technologies, processes and market strategies.

Local hoteliers in India often don't have the resources to compete with the large global hotel chains in terms of marketing budgets and investment in third party booking channels, or have the well-recognised brand name that goes hand-in-hand with these activities. However, there are a number of strategies that mid-level hotels can implement now to ensure that they are maximising their revenue and securing customer loyalty for the future.

It's important, as a hotelier in India, to maximise the ROI on all resources. Utilising data and analytics is the best way to determine marketing and pricing strategies for the future. Local hoteliers need to ensure they have detailed data that is both historical and forward looking. Historically, the data should include (at least) the number of occupied rooms, coupled with revenue by market segment by day.

Also ensure that number of rooms and revenue on the books by day (and by market segment) for at least the next 90 days is included. If data is collected every day it will allow the hotel to establish simple booking pace forecasts by segment and day of week, from which they will be able to compare to historical data. If this is done consistently it will allow mid-level hoteliers to quickly pick up any changes when demand picks up and enable them to tweak their strategies accordingly.

Local hoteliers need to be aware of the challenges that expanding international chains present when expanding into their markets. Markus Schneider General Manager of The Claridges, New Delhi commented that, ‘The risk for local hoteliers who may have not experienced working in other countries is that international brands bring knowledge of productivity, training, standard operating procedures [and] new concepts with them.

In addition, they will have their own loyal international customers who would prefer to stay with "the brand" they know. For an international five star and luxury brand, clear operational standards are set which have to been achieved and implemented to guarantee a brand identity. International brands will also bring in strong sales and marketing, reservation and yield management systems to maximise profits.'

Manish Dayya, General Manager for the Raintree Hotel in Anna Salai commented that the challenge to local hoteliers by the growth in international chains expanding into India is ‘not only about latest technology and marketing tactics [but] also about food presentations, beverage options, style and HR practices.' There is a lot that local hoteliers can learn from these international brands and also much that they can teach the larger players in the industry about the local market as well.

Mr. Dayya continued: ‘My past experience with international brands is that they do adopt a lot of national and regional requirements and customs as far as India is concerned, which otherwise they would not globally. This is an indication that the Indian market is very strong but still demands the authenticity of having the Indian flavour attached to this industry.'

International hotel chains have strong revenue cultures, but also thrive on offering an enhanced customer experience. Local hoteliers should learn from international chains and encourage staff focus on up-selling arriving guests at check-in, which can contribute significantly to your top line (up to three per cent and more). Also, when higher demand situations occur, local hoteliers should identify their VIP's early and make sure they don't get ‘bumped' if in a situation where overbooking occurs.

At the same time, they should ensure that staffing levels are adequate for those ‘spikes' in guest numbers that occur during an upswing. It is important that the hotel doesn't have too few people to handle all check-in / check-out and room turn around activities that help make the hotel experience as smooth and pleasant as possible.

There are also real challenges for all hoteliers operating in India, regardless of property size. Mr. Schneider of The Claridges, New Delhi highlighted that all hoteliers operating in India needed to become more innovative to ensure continual growth given increased costs and a relative slow-down in room rate revenues. He said, ‘Hotels overall in India, including new international brands, need to become more professional and looking at latest technologies and innovative strategies to ensure they can still generate profits for owners like in the past. Human resource and payroll is a key factor which is rising in an alarming speed over the past few years. Costs of supplies are rising, too. Unfortunately the room revenue and other revenues are growing on a much slower rate.'

To ensure that hoteliers in India are continually looking for ways to enhance their approach to pricing and revenue generation and to enhance customer loyalty, it is vital that hoteliers gain a holistic view of their guests' lifetime value, not just their room rate spend.

Data from all transaction systems need to be integrated to provide a true picture of a guest's preferred activities and their overall value considering all ancillary spend, from: online reservations to check-out, from food service to the day spa usage, from guest rooms to gift shop and more. In addition to making more profitable decisions about which guests' reservation requests to accept, a deeper understanding of guest preferences leads to better decisions about promotions, service offerings, inventory levels, food and beverage options, and casino floor layouts.

Furthermore, this integrated customer behaviour data supports wiser pricing decisions, supplier choices and financial strategies. Forecasting and optimisation then provide controls to ensure that revenues are optimised and costs are minimised across the entire operation.

Given the increasing competition from sophisticated international hotel chains coming into India, it is vital that local hoteliers understand their channels. Firstly, local hoteliers need to make sure that they are well represented in all key channels. This includes high quality pictures and up to date information which directly reflect the market segment most likely to book through each particular channel.

Establish win-win relationships with those distribution partners which can help generate incremental business and ensure they aren't locked into long term inflexible contracts which might hurt when business comes back. Additionally, local hoteliers should use historical and future channel benchmarking information from third party vendors to understand where they are falling short against their competition and when competitors are moving their rates.

Mid-level hotels also need to focus efforts on getting the most out of their search engine optimisation and marketing initiatives to ensure that these initiatives reach the most appropriate market segments.

‘A hotel's key to successful revenue optimisation includes consistent delivery of effectively priced offerings across multiple online channels,' noted Paul Southey, Vice President of TravelClick- Asia Pacific. ‘Business Intelligence is the cornerstone of informed decision making in revenue management.  A strong channel management solution in concert with an effective pricing awareness tool is standard operating procedure across the hospitality sector, globally.'

Siv Forlie, Director of Corporate Revenue Management at Shangri-La Hotels, shed further insight into the technologically-savvy mindset of an international hotel brand operating in India when she said that ‘it goes without saying that the pricing discipline in today's hospitality revenue management is a complex exercise.' She added, ‘Pricing is and will always be an extremely important aspect of revenue management. The question is whether you want to do it the easy way or the hard way. Pricing is not only about fluctuating your BAR rates according to demand and the competitive landscape – but it encompasses every aspect of optimisation; all segments, room types and products.'

With the rise in competition from international chain hotels into India, it is certainly not all doom and gloom for local hotel operators. Mr. Schneider of The Claridges, New Delhi highlighted that there were excellent local operators who knew how to use local market knowledge to their advantage. He said ‘I do not think you can put all locally owned hotels in one box.

Hotel Groups like The Oberoi, The Taj Group, Claridges Hotel & Resorts, Leela and single owned hotels like the Imperial in New Delhi, plus many more are doing a an impressive job and in many cases are well ahead of international brands. Many of these hotels achieved and created fantastic hotels in the past 40 – 50 years and even today are able to cope with International brands. They also have a very good understanding how the Indian market works which is in many ways, different to other countries.'

With the right investment in processes, technology and staff, local hoteliers in India should be well placed to address the growth in competition in their local market through expanding national and international hotel chains. The smaller scale of operations means that local hoteliers can also be nimbler when instituting change and can react quickly to a dynamic and changing market – making them better able to adapt in an evolving market.

References:
1 - www.moneycontrol.com/news/cnbc-tv18-comments/hotel-industry-expects-15-20-growthcoming-yrs_513088.html

Grahame Tate - Managing Director, Asia Pacific

In the role of Managing Director of IDeaS Asia Pacific territory, Grahame Tate brings 18 years of experience in the hospitality technology industry. Prior to joining IDeaS in 1997, Grahame held management positions with NEC Australia where he was responsible for the hospitality technology division of their voice and data technologies.

In the early 1990's, Grahame worked in telecommunications hospitality technology for Alcatel. Grahame currently is responsible for all sales and operations for IDeaS Asia Pacific territory and is based out of IDeaS Australia Office.