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Ginger Hotels bets on leisure destinations for future growth

LiveMint logoLiveMint 03-05-2017 Bidya Sapam

Mumbai: Indian Hotel Company Ltd’s (IHCL) budget hospitality brand Ginger Hotels is expanding its portfolio in the leisure segment mostly through an asset light model to boost its revenue and return to profitability, moving away from its earlier strategy of focussing on business travellers.

Roots Corporation Ltd, a subsidiary of IHCL that runs the Ginger brand of hotels in India, plans to have around 10,000 hotel rooms in the next five years, a three-fold jump from the existing 3,400. Of the total that is coming up, upto 40% would be in leisure destinations, said Rahul Pandit, chief executive officer (CEO), Ginger Hotels in an interview.

At present, the company operates 39 hotel properties, a fourth of which are under management contracts while the rest are either owned or taken under long lease by the company. It expects to take the number to over 100 hotels by March 2022 mostly through management contracts as part of its plan to increasingly adopt an asset light model.

“Till now our approach was more business locations and now we are going after leisure destinations also...We are seeing equal demand for both business and leisure hotels. Margins in leisure (hotels) are much better and not being in leisure is a detriment to our business,” Pandit said. The company has around seven properties in leisure destinations including Goa, Puducherry and Rajasthan.

As per a hospitality report released by JLL in April, a number of investors have set their sight on resort and leisure destinations due to a growing concern over the large volume of supply in cities. “Growing purchasing power, improved connectivity and reduced seasonality have provided a boost to the resort segment with increased leisure and MICE (meetings, incentives, conferencing, exhibitions) business driving growth,” the report said.

Similarly, a September 2016 report by hospitality consulting firm HVS showed that of the top 25 hotel performers in 2015 in terms of average room rates, 23 operate in leisure destinations.

Pandit said the company’s strategy to adopt an asset light model which is far less capital intensive and to enter the leisure hotel market would help improve its business in the next few years. In financial year 2016, Roots Corporation Ltd had a net loss of Rs11.09 crore with a turnover of around Rs142 crore. Numbers for the 2017 financial year are not yet available.

“Earlier during off-season half the inventories in leisure destinations would be shut. Now the off-season and on-season divide is dying,” Pandit said. The company has identified 12 regions or circuits like the Delhi-Jaipur belt and pilgrimage destinations like Bodh Gaya and Varanasi in North India.

Pandit said most of the expansions going forward adopting an asset light model would help in rapidly expanding its presence across the country as compared to its earlier approach to go for greenfield projects.

“If we want to grow rapidly and become a dominant leader in our space being asset light makes much more sense as it allows us to put our inventory in the market very fast. In greenfield (projects) the gestation period is long, you need to infuse a lot capital and there is lot of uncertainty,” he said.

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