Ginger_–

Ginger – Smart Basicse Mukta Kamplikar

Mukta Kamplikar is a Senior Practice Consultant at Tata Management Training Centre, Pune, India.

Company background Roots Cor Roots Corpor porati ation on Lim Limite ited d (RC (RCL) L) is a who wholly lly-ow -owned ned sub subsid sidiar iary y of The Ind Indian ian Hot Hotels els Com Compan pany y Limite Lim ited d (IH (IHCL) CL).. IHC IHCL L is a par partt of the Tata Tata Gro Group up of com compan panies ies www www.ta .tata. ta.com com,, Ind India’ ia’s pre premie mierr business house. Taj Hotels Resorts and Palaces comprises 57 hotels in 40 locations across India Ind ia wit with h an add additi itiona onall 18 int intern ernati ationa onall hot hotels els in the Mal Maldiv dives, es, Mau Maurit ritius ius,, Mal Malays aysia, ia, Aus Austra tralia lia,, the UK, the USA, Bhutan, Sri Lanka, Africa, and the Middle East. Incorporated on December 24, 2003, RCL operates the first-of-its-kind category of Smart Basicse hotels across India. Launched in June 2004, the Smart Basics e concept created a revolution in the world of Indian hospitality. RCL develops and operates a fast-expanding chain chai n of econ economy omy hotels across India unde underr the ‘ ‘Gin ‘Ginger’’ ger’’ brand. The comp company any either owns/leases land on which it develops and operates hotels and has now started entering into joint developments where the owner brings in the land and bare shell and leases the same to the company. The company’s recent growth has been organic, through developing and operating hotels in new cities or by going for additional hotels in existing markets, thus expanding the geographic reach of the hotel chain. The company intends to develop and operate additional hotels under both business models to maintain or achieve a dominant position in every market covered by their Ginger hotel chain. Going forward, the company is evaluating management contracts as a means of accelerating the growth.

Emergence and expansion of economy hotel chains in India The outlook for the future of the Indian economy appears buoyant. India’s India’s economic boom is expected to continue, albeit at a slightly slower pace. According to some agencies, real GDP growth (on an expenditure basis) is forecast to slow from 9.4 percent in fiscal year 2006/2 200 6/2007 007 to an ann annual ual ave averag rage e of 7.7 per percen centt bet betwee ween n 200 2007/2 7/2008 008 and 201 2012/2 2/2013 013.. The strength of the local currency against the US dollar will mitigate inflationary pressures to some extent by limiting import-led price rises. India is likely to record large surpluses on its ser servic vices es acc accoun ountt dur during ing 200 2008-2 8-2012 012,, dri driven ven by for foreig eign n ear earnin nings gs fro from m IT and ITE ITES S businesses.

The travel and tourism industry in india Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision making. The author/s may have disguised names; financial and other recognizable information to protect confidentiality.

DOII 10. DO 10.110 1108/ 8/204 204506 506211 211111 111106 10681 81

India’s tra India’ travel vel and tourism tourism mar market ket was val valued ued at US$42 bil billio lion n in 200 2005, 5, and is gro growin wing g rap rapidl idly y. India emerged as the fifth most-preferred destination by the world’s travelers in a survey conducted across 134 countries. India also figures in the Annual Readers’ Travel Awards 2005, which were announced by the prestigious magazine, Conde Nast Travellers UK, in its September Septe mber,, 2005 2005,, editi edition. on. The 5,000year histo history ry,, cultu culture, re, reli religion gion,, and alter alternativ native e medic medicine ine in India fascinate both budget and luxury travelers.

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VOL. VO L. 1 NO NO.. 1 201 2011, 1, pp pp.. 1-1 1-12, 2,Q Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES

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Tourism in India is the third largest foreign exchange earner, accounting for 2.5 percent of GDP. It also makes a direct contribution to the economy with significant linkages with agriculture, horticulture, handicrafts, and construction. The outlay on tourism development rose to USD 256.6 million in 2007/2008, from USD 196.5 million in 2006/2007, and continued to focus on the ‘‘Atithi Devo Bhavah’’(A Guest is God) campaign, targeted at the inbound foreign tourists in the country. This was furthered by the ‘‘Incredible India’’ campaign, which was showcased recently in the ‘‘Incredible India@60’’ campaign in New York. India’s lodging industry has expanded rapidly as a result of the substantial growth of the Indian economy and travel industry over the past several years. According to CWT Vision, hotel demand is mainly driven by two factors: international arrivals and domestic travel in India: B

International arrivals are forecast by the Indian government to increase from 4.4 million in 2006 to 6.4 million in 2007 and 10 million by 2010.

B

Domestic passenger numbers are forecast to increase from 30 million in 2006 to 35 million in 2007.

B

Looking further ahead, core demand will be boosted by the Commonwealth Games in New Delhi in 2010 and the Cricket World Cup in India in 2011.

The impact of increasing visitors and domestic travelers is naturally reflected in higher demand for hotel rooms. According to CRISIL, an India-based rating, research, risk, and policy advisory services company, demand should grow by 15 percent in 2007 and continue at this annual rate up until 2010. This compares to an already impressive 11 percent increase in 2006 (Figure 1). The historical undersupply of rooms has been a key driver of the Indian hotel market. It is only in the last three years that major global chains have made significant plans to expand their presence in India. According to market data from HVS International, a US-based Hotel consulting and valuation services’ company, supply should grow by 7 percent from 2006 to 2007, compared to a 4 percent increase from 2005 to 2006. Growth should accelerate sharply, with an annual average rate of up to 26 percent between 2007 and 2010. There are other trends that contribute to growth in the Hospitality Industry in India. At USD 27.6 billion in 2005, India’s transportation industry is the largest sector of the travel and tourism industry. Investment in international quality roads, the launch of low-cost carriers as well as the expansion of the railway network were responsible for driving growth. By 2010, India is expected to have 100 million internet users, with the majority of them aged 25-39. About 16 percent of travel retail business in 2010 is expected to be sourced through Figure 1 250

250 Demand evolution

Supply evolution

200

200

   )   x   e    d 150   n    i    (    h    t   w 100   o   r    G

   )   x   e    d 150   n    i    (    h    t   w 100   o   r    G

50

50

0 2005

2006

2007

Sources: CWT

2008

2009

2010

0 2005

2006

2007

2008

2009

2010

Travel Management Institute, Crisil Analysis based on 24,000 rooms in 315 hotels across ten cities; CWT Travel Management Institute, HVS Intl Analysis based on 62,055 rooms in 1,151 hotels across 30 cities

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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 1 2011

the internet, as the nascent dynamic packaging subsector picks up due to the efforts of on-line retailers (Euromonitor, 2006). The travel retail sector constituted 17 percent of the travel and tourism industry in 2005, and was the second largest sector, valued at USD 6.9 billion. With 25 percent growth in 2005, it was responsible for driving much of the value growth in the overall market. On-line hotel reservations in India have also picked up, but constitute just 3 percent of the business. Travel agents also recognised the importance of the internet as a means to distribute and market various deals, drawing in 7 percent of business from this medium. Much of it is, however, still not real-time (Figure 2). By 2020, the Government of India expects travel and tourism to contribute USD 212.5 billion to GDP, almost four times the value in 2005. With successive governments committed to reform, a strong manufacturing sector and a private sector that already has a critical mass needed to drive growth, it is unlikely that the strong growth in GDP is likely to be reversed. The rising middle class is also becoming increasingly affluent, mobile, internet-savvy, and more sophisticated in terms of demanding quality tourism products and services, and more importantly, the price they are willing to pay for it. The Indian middle class is, however, extremely value-conscious and prefers not to spend too much on accommodation. Indians are increasingly seeking world-class facilities, such as clean and comfortable accommodation, internet connectivity, and perhaps even fitness facilities, at local prices.

The economy segment Historically, hotel development projects in India generally focused on upscale hotels that were primarily targeted at international tourists and corporate travelers. New hotels will be concentrated in 18 main cities over the next ten years, as shown in Figure 3. Between 2007 and 2010, supply will increase in all categories of hotels, as shown in Table I. While growth is expected in the upscale hotels, the growth in the economy segment is still minimal. While several chains, both domestic and international, have announced plans for development of hotels in this segment, visible action on the ground is limited. Figure 2

Jaipur Cochin Goa Pune Hyderabad Bangalore Chennai Kolkata Mumbai Delhi/national capital region 0

20

40

60

80

100

Growth as a percentage of supply Budget

Mid-market

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First class

Luxury

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VOL. 1 NO. 1 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

Figure 3 60

50

40

  s    l   e    t   o    h    f   o 30   r   e    b   m   u    N

20

10

0

   R    b  a   i   o  r  e    b  a  d   u  n  e   n  a   i   p  u  r   o  a   a  t  a   c   h   i   a  m    b  a  d   p  u  r   g   r  a   a  n  a   o  w   o  r  e   o  r  e   C    l    i   G   o   l   k    K  o   a  t  n   d  a   a   i   A    h   i    k  n   y  s   a  t    i   N   M  u  m  a  n  g   a   d  e  r  a    P   C   h  e  n    J  a    h    K   u  d    L  u  c    M    i  m   b    l   a  p    h  e  m    U  d   y    L   e    h    B    H    D   C  o   s  a   k   A    i    V

Source: HVS

International

Economy hotel chains in India mainly target value-conscious domestic business and leisure travelers who demand convenient lodging, a consistent product and high-quality services. Currently, 37 percent of economy hotel guests are individual business travelers, 23 percent are contract corporate customers and 20 percent are individual leisure travelers. Economy hotel chains aim to satisfy customers’ basic accommodation needs with affordable pricing, a comfortable lodging experience and a standardized service-product. Lack of competition in the branded economy hotels segment is a great opportunity for Ginger.

Ginger – the service concept The concept of Ginger was developed in association with renowned corporate strategy thinker, Dr C.K. Prahalad, and the hotels were indigenously designed and developed by

Table I

Agra Ahmedabad Bangalore Chennai Delhi (NCR) Goa Hyderabad Jaipur Kolkata Mumbai Other cities

Existing supply 

Proposed  supply 

Increase over  five years (%) 

Development  supply (%)

1,336 519 1,906 2,075 7,030 2,252 1,442 1,298 1,354 7,402 8,056

384 462 7,794 4,407 10,856 2,632 7,048 2,770 2,465 9,318 6,870

28.7 89.0 408.9 212.4 154.4 116.9 513.7 213.4 182.1 125.9 85.3

69 48 55 36 74 18 57 42 61 36 47

Source: HVS International

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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 1 2011

First  Luxury (%)  class (%)

– – 32.1 28.0 24.8 12.4 25.4 11.7 11.2 30.8 3.9

– 32.5 16.7 38.0 27.0 43.6 34.4 36.3 29.4 28.9 18.6

Mid-market (%)

Budget (%) 

37.5 15.6 37.0 23.1 38.2 25.6 21.3 26.0 49.7 26.7 24.0

62.5 51.9 14.2 10.9 10.0 18.4 18.8 26.0 9.7 13.6 53.5

the IHCL. The Ginger hotels are built around a concept that provides facilities to meet the key needs of today’s traveler, at affordable rates. Smart Basics e is a philosophy of providing intelligent, thought-out facilities and services at a ‘‘value’’ pricing and reflects the new spirit in which people live and work today. It signifies the emerging lifestyle which is visible in the degree to which individuals have taken control of their various activities, namely, the use of email instead of letters as also the use of mobile phones, conference calls, and video conferences to get things done quickly and efficiently. Essentially, it is simplicity and convenience in ease of doing business (awareness, booking channels, payment gateways); informality, style, warmth, and modernity in its approach to product design, service philosophy, and affordability in pricing. The first of the Smart Basics e hotel was launched in Bangalore and was called indiOne. Having completed the test marketing of the concept and subsequent fine-tuning of the hotel facilities and services, the Smart Basics concept is now being rolled out across India. This category of hotels has been launched with a new name – Ginger hotels – in sync with the fresh, simple-yet-stylish and warm world of Smart Basicse. A GenNext category of hotels, Ginger signifies simplicity, convenience, informality, style, warmth, modernity, and affordability. The target segment for Ginger is the large growing middle class with increasing disposable incomes, the class of travelers who would spend on travel but not on luxury accommodations, who would look for value for money for accommodation that is clean and secure and international travelers looking for hygienic accommodation in non-metro cities.

Ginger’s perspective on growth and strategy Ginger has the following criteria while deciding upon where to direct the growth of the company. They focus on cities that are approaching, or have already entered into, periods of significant economic growth. Such cities generally show growth in certain business activities, population growth rates, tourism, and convention activities, air traffic volume, local commercial real estate occupancy, and retail sales volume. Markets that exhibit growth in these metrics typically have strong demand for hotel facilities and services. Ginger has identified over 80 such cities in India and intends to focus on these cities, going forward. To maintain a geographically diverse portfolio of hotels to offset the effects of regional economic cycles, Ginger would continue to expand into new urban business centers that meet their investment criteria. For specific hotel units, Ginger seeks to invest in hotels situated near both business and leisure centers that tend to generate a broad base of demand for hotel accommodations and facilities and enable them to attract both weekday business travelers and weekend leisure guests. The members of finance, development, marketing, and hotel management teams assess the potential financial return of every proposed new hotel and the company will only develop hotels that exhibit a potential for meeting our internal financial return objectives, both in the near term and over the term of the agreement. As regards size Ginger seeks to develop and operate economy hotels with 100-200 guest rooms, which include amenities that are attractive to key demand segments such as individual business and leisure travelers as this allows them to maximize profitability. In select locations they look at smaller inventories. The goal for the company is to become the leading economy hotel chain in India, and select other geographical markets. They intend to leverage competitive strengths to replicate the business model consistently in both existing and new markets in India and their primary growth strategies are to expand geographical coverage to capitalize on Early-Mover advantage. By capitalizing on their early-mover advantage when entering and developing a given geographical market, Ginger can capture a significant market share ahead of its competitors. The target markets include major metropolitan areas, regional centers demonstrating strong economic growth, and select resort/tourism destinations. The company has identified over 80 cities that we intend to focus more on going forward. To increase penetration in existing markets, the company intends to continue growing organically in the existing cities in which they operate by selectively establishing more Ginger hotels,

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focusing on locating units near ground transportation hubs, business centers, shopping centers, and industrial development zones given that many of their existing markets continue to be under-served by hotels. The company is also evaluating entering into Management Contracts, as a means of accelerating the growth. Ginger has already achieved significant brand recognition among their existing and target customers. Since word-of-mouth referrals have been, and will continue to be, a key factor in building awareness of the brand, Ginger intends to continue enhancing their brand by maintaining the consistency of service-products and through innovative ideas to achieve the best home-away-from-home experience for its customers. Says CEO Pani, ‘‘At Ginger, we clearly recognize that our modern young minded traveler will evolve with time and Ginger must evolve with the evolving customer. We have done this by making sure that any changes, any innovations, any modifications that are made to the product are made with it is by keeping the customer at the center of it all.’’

Competition The lodging industry in India is highly fragmented and competitive, and competition is expected to persist and intensify. Currently, Ginger competes with three star full service hotels from the unorganized sector. Going forward we see competition continuing from the unorganized section of the market as well as from newer international and local hotel companies who have announced their intent to set-up hotels across the country in the value segment. The market is witnessing a fair amount of activity in this segment of the hotel market. Some of the companies who have announced plans to establish a presence in the country include (Table II). While some developments have started in the mid-market segment with Lemon Tree Hotels, Ibis (Accor), Keys (Bergruen Hotels), Day Hotels (Dawnay Day), Hometel (Sarovar Group), Hilton Garden Inn Hotels (DLF), and Taj Gateway Hotels, not much activity is visible at the economy end of the spectrum. This is possibly on account of the high prices of real estate.

The offering – smart basicse Ginger hotels designed their facilities and services to include The Square Meale – a multi-cuisine restaurant, On-site cyber cafe´, a meeting room (to seat ten people), laundry facility (same day delivery), On-site ATM, a Gymnasium, secure parking, and Doctor on call. Ginger lays special emphasis on environmental and ecological issues through the usage of

Table II Brand

Promoters

Plans  

Formule 1 Easy Hotels Sleep Inn

Accor in a JV with Emaar MGF Isthitmar, Dubai Choice Hotels with Gupta Group

Tune Hotels Red Fox Peppermint

Air Asia, Malaysia Lemon Tree partnered by Warburg Pincus Royal Orchid Hotels

Kamfotel

Kamat Hotels

Days Inn/Super 8 Premier Travel Inn City Max Hotels Travelodge Campanile

Wyndham with Gammon Whitbread in a JV with Emaar MGF Landmark Group, Dubai DIC Starwood

100 hotels in the next decade New look pod hotels Ten hotels by 2010; first hotels in Tirupati and Vizag First hotel in Goa Ten hotels by 2010 50 hotels by 2010; bids for 11 hotels on Railway land are held up; first hotel open in Hyderabad 50 hotels in the next five years; focused on West coast; tie-up with ONGC/MRPL 38 hotels by 2011 80 hotels in ten years 20 hotels by 2009 No numbers mentioned No numbers mentioned

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compact fluorescent lights, well utilized natural lighting, auto time management for air-conditioning and energy-efficient hydro-pneumatic systems. Ginger provides single rooms for the lone traveler, twin rooms: separate beds for those who travel together and double rooms: a queen-size bed and special rooms for specific needs of the physically challenged. The rooms are packed with electronic locking systems, cable TV, internet connectivity, a mini fridge, tea/coffee makers, self controlled air conditioners, an ergonomic work area, and a 17 inch flat screen TV. Each room has branded toiletries, 24 hours hot and cold running water, a shower area, and bath and hand towels. To ensure safety, Ginger is equipped with 24 hour security, closed circuit TV to maintain records of all visitors, swipe card locks and digital safes located at a Give ‘‘n’’ Take counter at the lobby. In addition, it has supporting infrastructural facilities including administrative offices, kitchens, housekeeping, HVAC facilities, Diesel Generators for emergency power supply, water treatment plant, sewage treatment plant, etc. e

Ginger has outsourced food and beverage partners operating on a revenue-share model, including Cafe´ Coffee Day in select properties. Ginger also offers other facilities like ‘‘SMART Wellness,’’ which is an Ayurvedic wellness facility for business travelers at a low cost. This has been developed with Arya Vaidya Pharmacy at all business-cum-leisure locations. Ginger has introduced ‘‘SMART Sleep,’’ which includes a posture-pedic mattress for absorbing and redistributing pressure from the body weight and for sensing body motion and responding with increased support, a tropical duvet and anti-allergy pillow. The company has also introduced self-operated vending machines that accept Indian currency to ensure customer convenience. The company is now developing a ‘‘SMART Shower,’’ as the organization believes that a customer’s sleep and bath are his most important needs at the hotel. Going forward, Ginger Hotels plans to develop its own range of merchandise that will be offered in the hotels and on the web site. The merchandise is to include the bath collection, bedding collection, furnishings and de´cor, apparel, accessories, travel accessories, etc. Ginger intends to increase RevPAR by maximizing Room Rate growth by adopting a flexible pricing approach/policy, which will be linked to the occupancy levels in the individual hotels. Ginger operates predominantly in a large geography of non-metros with uncontested market opportunity (Figure 4).

Competitive strengths, differentiation, and challenges Ginger is the only branded economy hotel chain in India with a nationwide network of nine hotels, with an additional 20 hotels under development as of September 30, 2007. Early-mover status in many markets and established regional operational synergy has enabled Ginger to develop and operate hotels efficiently and successfully in targeted markets. As the only branded economy hotel chain in India, the chain has been able to establish credibility with property owners and secure desirable properties on favorable lease terms. Theeconomy segment (three-star) is better protected against andmore resilient to the volatility in the hospitality segment as compared to the upscale segment and therefore there is low cyclicity of business. While Ginger offers a standardized product in all its hotels to maintain the uniformity of the hotel chain, it has developed innovative and unique product features, consisting of the design, appearance, color scheme, decoration, lighting, and amenities that make the Ginger units attractive to customers and provide differentiation from competitors. The innovations are borne out in the independent customer surveys conducted. Since Ginger commenced operations in 2004, the company has developed a track record of expanding the business operations through organic growth, while maintaining a consistent and high-quality product and achieving strong financial performance. Ginger has adopted a company-wide seamlessly integrated IT system developed by SAP and is in the process of moving from the legacy system to this new IT system. The purpose is to be able to better refine resource allocation, respond to changes in geography, adjust operational details, and set budgetary

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Figure 4

Ludhiana Amritsar Mohali New delhi Jaipur

Haridwar Pantnagar Guwahati Varanasi

Ahmedabad Vadodara Nashik  Mumbai

Baddi

Pune Pune II

Agartala

Jamshedpur Jharsuguda

Durgapur Bhubaneshwar

Hyderabad

Paradip

Panaji Bangalore Mysore Bangalore II Mangalore Tirupur Chennai Pondicherry

Existing Under construction Signed up

Thiruvananthapuram Signed up for 2 properties in Hyderabad

targets by using current information that is readily available. Because of the shortage of manpower (by design) in comparison to a conventionalhotel, it is critical that theIT systems at Ginger are both robust and hugely flexible. But the challenge that still remains is to make systems an integral part of the managerial decision-making process. Ginger’s CEO Pani believes that Ginger’s ability to create systems rich enough to enable difficult managerial decisions while dealing with ambiguity and to train its people, to be able to use data for decision making and make data available at all levels for executive decision making is very important. Going forward Ginger aims to create and implement systems that provide easily retrievable data to enable managers to make effective decisions. Says CEO Pani, ‘‘For instance, in a case where while a customer is checking out and the housekeeping informs the reception that the TV in the customer’s room is lying smashed on the floor what should the manager do? The ITsystem should ideally enable the manager to make a decision on this by providing data that is easily retrievable from the system using key words.’’ The senior management team at Ginger (drawn from the parent company – IHCL) has huge experience in the hospitality and other consumer product and service industries and a proven track record of identifying, developing, operating, and managing hotel properties successfully. While the company has managed a low attrition rate among its managerial staff since inception, the attrition rate in individual units and front line is a matter of concern.

Employees and training Ginger is characterized by a high turnover of frontline staff, rapid growth, and dispersed locations. The need for standardized service delivery in remote locations is also a challenge. Ginger believes that their ability to attract good talent, train, and retain employees is critical for their growth strategy and that people are critical to maintaining the quality and consistency of its services and thereby their brand and reputation. The business model of Ginger uses a fair amount of outsourcing. Only eight to nine managers per unit (per hotel) are

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on the rolls of Ginger while all other facilities like kitchen, restaurant, backend maintenance, are outsourced. Ginger has a total of 175 odd permanent employees. Since housekeeping and food and beverage are outsourced operations those employees are on the vendors payrolls. Ginger tries to leverage Hotel management schools to develop a management talent pool with sufficient capacity to meet the demands presented by our rapid growth. The company aims to recruit, train, and retain the best talent through a multi-step recruiting and training process and career advancement opportunities. Ginger has implemented extensive training programs and periodic tests for managerial and other hotel-based staff primarily through training partners. New unit managers of the hotels are required to undergo a two-month training period, during which they receive training in managing all core aspects of the hotel operations, as well as the company culture and philosophy. In addition to training, we have implemented periodic web-based tests to assess the relevant knowledge and skills of our managerial and other employees. The company uses performance-linked compensation structure, career-oriented training, and career advancement opportunities as key drivers to motivate its employees. Ginger’s challenge is to ensure that the outsourced partner delivers up to service standards that Ginger has laid. Also, to be able to create/modify the outsourced partner’s systems and processes to Ginger’s in order to deliver consistent good quality of service to the customer is critical. Since each person in the system is working towards the same goal, namely, customer delight, and there are few differences in terms of employee profiles between employees of the outsourced partner and the employees on the rolls of Ginger, it is important to ensure that the people working with the outsourced partner see themselves as a part of the same team and the outsourced partner sees merit in following policies, processes, and systems that are not the same but are similar to those of Ginger. Ginger operates in a large geography of smaller non-metro cities where profiles of employees in terms of their exposure to technology, comfort with modern amenities, etc. are different from that of a metro; the challenge therefore lies in getting employees to gear up. To be able to design systems to recruit the right kind of people and provide the right kind of training to employees is a challenge forGinger because while the developmental inputs need not be identical across unit locations, the output in terms of consistent service to fulfill customer needs has to be fairly identical. Additionally, acquiring professionally qualified employees locally (in remote areas and non-metro cities) and retaining talent at those locations is an area of concern. In their endeavor to retain talent, Ginger makes efforts to ensure that employees see additional value in terms of non-monetary rewards like – developing employee competencies and makes this visible to their employees by providing certifications, etc. but to be able to consistently ensure this across locations remains a challenge. Despite these efforts, if there is attrition, to be able to train and retrain employees (since the numbers are very small) at remote locations becomes very difficult. Ginger’s people challenges are attracting talent and keeping them continuously motivated given vast opportunities for young talent. Ginger training head Bhanot says – ‘‘We are cost conscious and so we need to use unconventional methods of recruitment because conventional methods like placement agencies turn out to be very expensive. We recruit through careers @ ginger, our recruitment portal, and about 48 percent of recruitment happens through this site. The rest of recruitment is through referral programmes (with rewards for referring) and the methods have seen successful. We also build relationships with business schools and our employees go to colleges and partner with them by linking with their syllabi, calling students for get togethers, using students as summer interns, instead of going once in a year like most companies do. We try to build relationships before the recruitment even starts. We also try to address the challenge of keeping our young staff motivated by giving people an opportunity to learn and grow by continuously upgrading their skills. We are a budget hotel and we choose e learning initiatives to cut costs. We have in house training, induction, training operations and e-learning modules (based on customer feedback systems) and programme content is created internally.’’

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Centralized hotel management Personnel at corporate office perform strategic planning, finance, project development, sales andmarketing, training, and other functions and guide, support and monitor ouron-site hotel operations and executives. The key elements of Ginger’s centralized hotel management program are: Budgeting and monitoring (the annual budget is based on historical operating performance of the hotel, planned targeted marketing, planned renovations, operational efficiencies, and local market conditions),quality assurance and training – quality standards have been defined for all aspects of hotel operations, covering housekeeping and hotel maintenance and to ensure compliance with these quality standards, a set of procedural manuals have been created and employees are trained to ensure the effectiveness and uniformity through the human resources department at our corporate office as well as through outsourced training vendors. The compliance with quality standards is monitored through both scheduled and unannounced visits and reviews conducted periodically at each hotel. Employees take periodic tests (including e-certification) in order to monitor compliance with quality standards. In addition, the practice of mystery audits and of tracking customer comments through guest comment cards, and the direct solicitation of guest opinions regarding specific items, allows Ginger to improve services and amenities at each hotel across the chain hotel chain. To maintain a competitive edge and enhance our hotels’ appeal to targeted market segments, the company requires each of the hotels to allocate a fixed percentage of their revenue for periodic renovation and replacement of furnishings and equipment to maintain the quality and standards of its facilities. Ginger has implemented a centralized procurement system (where possible, along with the parent company, IHCL) to obtain the best pricing available for the quality of goods sourced to the hotels and to minimize the operating expenses. Ginger supports local sales efforts of each of its hotels along with corporate office sales executives whodevelop andimplement new marketing programs, and monitor and respond to specific market needs and preferences.

Hotel information and operational systems Integrated information and operational systems have been designed to distinguish the company in the marketplace, operate efficiently, and cost-effectively and accommodate future growth. Ginger invests in sophisticated system infrastructure for better customer service, simplification of storage and processing of large amounts of data, facilitation of the large-scale operation and automation of the administration of business and generating financial and operational information for each unit to assist the corporate management in adjusting business strategies on a timely basis. The key hotel information and operational systems include the property management system to synchronize each hotel’s room inventory with their reservation system, facilitating the sales team to sell last rooms at the hotels, the central reservation system (CRS) (8 percent room nights are booked through our CRS system), and a SAP web-based management reporting system that allows tracking each hotel’s daily occupancy, average room rates and other operating and financial data. Theperformancemonitoring for all key systems enables Ginger to respond quickly to potential problems. The computers and servers are hosted at a facility in Mumbai.

Marketing Ginger Ginger’s core targeted customers consist of corporate customers, value-oriented individual SME business travelers and leisure travelers seeking comfortable and convenient lodging at an affordable price. They review hotel pricing twice a year and typically adjust room rates annually based on the local market conditions of the city and the specific location of each hotel. The corporate office team and the city and hotel managers jointly develop tailored marketing plans to drive sales for each hotel and in each city. Ginger operates in a large geography of non-metro cities like Agartala, Guwahati, Nashik, Bhubhaneshwar, and Durgapur where profiles of customer in terms of their exposure to technology, comfort with

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modern amenities, etc. are different from that of a metro. The challenge therefore lies in customer responses to these. Ginger is currently using the following distribution channels including online media: B

Web site – internet booking engine hosted on the Ginger web site is one of the main channels used for making the bookings.

B

Large travel agencies and smaller travel agents.

B

Call Center – Ginger currently has a call center which can be reached through a toll-free number.

B

Travel portals and other travel-related web sites.

B

Distribution partners – partners like BPCL which is currently rolling out travel desks in various BPCL petrol pumps across the country is also used as channel for distribution.

Access to these channels allows further enhancing occupancy rates of the units (hotels) on a day-to-day basis. The Ginger brand, trade names, trademarks, trade secrets, and other intellectual property rights distinguish and protect their technology platforms, services and products from those of their competitors, and contribute to competitive advantage in the economy hotel segment of the lodging industry in India. These intellectual rights are currently owned by the parent company IHCL. To protect the Ginger brand and other intellectual property, they rely on a combination of trademark, trade secret, and copyright laws as well as imposing confidentiality obligations on their employees, contractors, and others. Ginger has registered trademarks in India, including ‘‘ ’’ and a registered domain name, namely, www.gingerhotels.com Ginger’s corporate marketing and advertising programs are designed to enhance consumer awareness and preference for the Ginger brand as offering the best value, convenience and comfort in the economy hotel segment of the Indian lodging industry, and to encourage customers’ use of our centralized reservation system. Marketing and advertising efforts include outdoor advertisements, distribution of flyers and other marketing collateral on our hotel properties, television, internet, and radio advertising, print advertising in consumer media and promotional events, special holiday promotions, and joint promotional activities. Reshaping customer expectations to make the brand endearing: Ginger does not provide room service, no valet, no bell desk, and communicates the message ‘‘Please help yourselves’’ through its advertisements (Video – ‘‘Please help Yourselves’’). The advertisements (which is by far the only way Ginger externally communicates with its customers) conveys that since none of the above facilities are provided by the hotel, the customer saves on tips. While the Indian customer is still uncomfortable with the concept of Smart Basicsand grapples with ‘‘there wasnobody to receive me,’’ ‘‘nobody gave me water in the room,’’ ‘‘I called 7 times and the room boy did not turn up’’ and clearly experiences an expectation-perception gap, Ginger experiences many customers each day who enter the hotel ‘‘not knowing what to expect.’’ And many complaints on the web sites and complaints registered across the counter at the units (hotels) have to do with services Ginger does not provide (by design) rather than dissatisfactions caused by service or customer service at Ginger. Creating awareness for the Ginger brand at this point in time is a challenge and since the business model does not allow huge spend on media, innovative promotion is the need of the day. Ginger made quirky use of media by materializing the idea of using a life-size model of the hotel and hiring someone to live in it and carrying the campaign to metros for promotion and BBC, CNN coverage (video). Ginger needs to get in larger number of people to come in recognizing and knowing what they should be expecting from the hotel. The challenge is not only the communication that is put out in the form of an advertisement but is also of being able to communicate when a customer checks in. Ginger’s ability to communicate clearly what the customer can expect is

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VOL. 1 NO. 1 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

an area of concern because there is a tendency to not explain either because the customer does not have the patience to listen or there is a fear of losing this customer. Ginger has been trying to plug this by educating the customer before he/shechecks in by having commercials playing in hotel, training front line managers to give clear messages to the customer as to what Ginger can deliver and also through external communication through advertising (Video – ‘‘No Tips’’). Case questions:

Keywords:  Hotels, Hospitality management, Hospitality services, Marketing strategy, India

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B

How has the marketing and competitive environment for hospitality changed in India and what are the implications for Ginger?

B

Categorize Ginger’s strategy to manage its challenges into – facility improvements, process changes, people management and value added services?

B

How does Ginger create customer value?

B

What is the philosophy entailing the service concept of Ginger?

B

In the long run, is Ginger a sustainable model in the Indian context?

B

What are the key challenges in the way to service excellence for Ginger?

B

Based on the characteristics of the target segment for Ginger, what are the various initiatives that to enhance perception of service quality?

B

Given that Ginger is different in many ways from a traditional hotel, what are the ways in which the seven Ps change to make Ginger a sustainable and profitable business model?

B

How can Ginger manage customer expectations more effectively?

B

Are there better methods of looking at Ginger’s people challenges?

B

What are the implications on service quality and customer satisfaction?

B

What are the biggest implementation challenges of Ginger’s model?

B

How would you address the service process and customer acceptance challenge?

B

Considering budding competition and growth in the hospitality industry what should be the respondent strategy for Ginger to face the challenges of the future?

B

Evaluate Ginger’s brand positioning and communications strategy. Given that the number of players in the budget hotels market is increasing and the boom in the hospitality industry will Ginger be able to sustain its unique positioning?

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PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 1 2011