'Colaborate' will spearhead the Gig Economy that’s set to take India by storm: Dominic CostaBir, director, Hospitality Training Institute

An entrepreneur since the 5th standard and an alumnus of the Institute of Hotel Management (IHM), Mumbai (1990 batch), Dominic CostaBir started the Hospitality Training Institute (HTI) in 2002, post his 12-year stint in hospitality operations. In the last over 16 years, HTI has conducted various training programmes including team building, behavioural leadership and entrepreneurship across India and international markets like Mauritius, Kingdom of Saudi Arabia (KSA), Philippines, Sri Lanka, Nepal, UAE and Maldives. An avid reader and a believer of ‘preaching only what he practices’, CostaBir talks about the company’s training business, new initiatives, the challenges and opportunities it presents and more. Edited excerpts...

What is the nature of business conducted under HTI?
Customer-facing personnel viz. waiters, front office staff and housekeepers handle customers, bring in sales and make or break a brand thereby making the biggest impact on hospitality and food service businesses. The question to ask however is that, are the staff members motivated and trained enough to convert walk-in customers to loyal patrons? HTI, through specially designed training programmes -- in both soft skills and job skills, has been working in this area and helping personnel working in restaurants, hotels, hospitals and retail businesses to achieve the desired goals.

You’ve recently introduced the Colaborate platform. What’s it all about? What made you enter this space?
Colaborate is the solution to the current economic crises. The Colaborate App connects companies and professionals on a freelance basis (internationally called the Gig Economy). Organisations face lower risk in restarting operations, while retired professionals, stay-at-home moms, teen students and out-of-work professionals can conveniently earn sustenance.

What's the size of the industry being addressed with this initiative?
In India, it is still very nascent hence the right time to foray. While the concept is picking steam, the impact of COVID-19 pandemic across businesses and job market(s) is set to bring the gig economy to the fore in the country.

Internationally though, the gig economy is trending. An estimated 36% of US workers are giggers and 33% of companies extensively use gig workers. As per MasterCard, US giggers contributed $1.28 trillion to the economy in 2018; about 5% of the US gross domestic product (GDP) and a whopping 44% of the global gig economy. Gigs are more popular with age groups 18-24 and 55-64 (76%) as compared to 68% for 45-54 year-olds. In fact, American financial services firm Payoneer has said that Philippines is the only country to have more female gig workers (62%) followed by the US with 47%.

Interestingly, as per a study, the US gig economy is growing three times faster than the traditional model. Consequently, PeoplePerHour (a leading gig economy company) has reported a significant jump in year-on-year new gig workers in Japan (513%), Spain (329%) and the UK (300%) since the COVID-19 outbreak. In India, apparently 97% of people are open to gig work.

What's the current and future growth rate for platforms (digital and non-digital) operating in this sector?
This space is still very unorganised hence statistics are not available. However, global trends indicate a huge shift in favour of the gig economy and gig culture. As per CNBC, the US has about 170 gig economy companies and bigger entities like Upwork, Airbnb, Uber, Amazon and Etsy are driving the numbers up. The gig economy is expected to grow by an impressive 17.4% compounded annual growth rate (CAGR) by 2023. And as per most predictions, gig workers will outnumber traditional workers in the next decade or so.

In India, who are the key players – digital and non-digital – catering to this market at present?
The gig economy participants in India mainly comprised your housemaids or house cooks; the plumbers, masons, carpenters who sit at nakas (junctions or labour chawrahas), the banquet casual workers etc. Over the past few years, we've started seeing some organised activity from the likes of  Uber, Ola, Swiggy, Zomato, Urban Clap and so on. However, their business model is business-to-customer (B2C) centric.

And your platform caters to the business to business (B2B) space?
There are two segments actually. The first one involves astute owners and top management of companies that see value in shifting fixed costs (salaries) to a variable cost. This way, sales (rise or drop) are directly and proportionately linked to manpower costs. Smart businesses have already shifted to an asset light model (leasing property) and now will run on a HR (human resource) light model.

The second segment comprises individual entrepreneurs or professional freelance workers called liberated associates (LAs) who would love to work, but want it their way. Choose the time, place, hours of work and yes; the fees that suit them. They may also be explorers at heart who are bored by repetition. These could be retired professionals, stay-at-home moms or teen students looking for temp work to earn pocket-money or sustenance. Out-of-work professionals could also use Colaborate as a stop-gap arrangement till the economy picks up and full-time jobs are available.

Tell us about some of the pain points Colaborate is attempting to address?
Traditionally, there’s inherent distrust between employers and employees. Employers find staff disloyal, complacent and unappreciative of wages/ benefits. Staff feel neglected, underpaid and overworked. The uncertainty and volatility caused by Covid-19 has made matters worse. Owners can’t commit permanent employment or even annual wages. Job security is non-existent for staff.

Due to the pandemic, growth for the first time in decades has turned negative and an estimated 1.3 crore have lost jobs. At least twice that number are on salaries today ranging from 10% to 50% of what they were earning pre-pandemic. Many small and medium entrepreneurs under the burden of steep rentals, high interest, equated monthly installments (EMIs) and fixed salaries have shut down forever. And many large companies and conglomerates are desperately looking to restructure loans, raise debt to pay salaries and are still loss making. Indigo Airlines, for instance, has posted a quarterly loss of Rs 1,1195 crore.

Colaborate allows both to reengage in real time using tech as the driver. Companies need not commit annual or monthly salaries, can hire exactly as per production/ sales demand, and are relieved of statutory compliance  viz. employees' provident fund (PF), employee state insurance (ESIC), professional tax (PT), gratuity etc. On the other hand, post nine months of lockdown and work-from-home, people have realised that their fast-paced and economically rewarding lifestyle costed them dearly. They had compromised on freedom, family time, health and work-life balance. Colaborate is the way to reclaim their lives and freedom.

The app facilitates flexibility of choosing the time, location, organisation, type of work, hours per day etc. It allows one to explore or experiment with organisations and even type of work. You are not committed to the gig (task) for a year or month – just short stints. If the liberated associate likes the work and they (companies/ business owners) like the LA’s work, they can continue. If not, dissociate.

Briefly tell us about the key offerings?
Colaborate creates a direct link between companies and professional freelance workers. They engage on low time commitment (as low as four-hour shifts) and since it's a B2B engagement, there are no compliance hassles either. Negotiations in the form of bids and offers (BO) are made based on skill set, needs, availability – demand and supply. Companies and LAs rate each other and directly affect employment demand and fees. Companies’ fixed costs are now variable, lowering break-even point and wage bill while LAs are not dependent on one organisation. Hard-work and cooperation are rewarded by increased demand and fees.

What all went into putting Colaborate together to ensure the offerings meet the requirements of the end user(s)?
Most of the aspects are part of any app launch in terms of look, feel, being user-friendly, interactive and multi-lingual. But we are also building in hooks via surprises. For example, the BO feature is a negotiation that is done in real time, auction style. So, when an LA makes a bid, he isn’t sure if it will come through or not. And when a company places an offer, they want the gig to be picked up at the best deal possible to control their costs.

This will require a sharp business acumen, knowing when to cut your bid or raise your offer. The barter system will bring in elements of fun and excitement. Imagine you could pick up a gig as a receptionist in an exotic location and get paid too. Now, imagine your partner or spouse could also be with you as s/he may be doing a gig in their kitchen or as part of their housekeeping crew. Exciting to say the least, right?

How challenging (regulatory/ non-regulatory) was putting together this platform?
Initially, India’s stringent labour laws and conservative approach to reforms was the biggest hurdle. However, on September 29, 2020, the Ministry Of Law And Justice passed The Code On Social Security, 2020 that identifies gig and platform workers as persons who work and earn outside of traditional employer-employee relationship. This means not only is the ‘gig system’ legal, it is free from traditional statutory compliance. However, the code clarifies that the Government may frame schemes for gig workers and their families to provide such benefits.

How much have you invested in the business so far and how did you go about funding it?
The entire seed capital (less than a crore) has been internally raised and includes a bit of debt. We opted out of seed or angel funding as we felt this would compromise on speed, due to the inherent distractions they’d bring. Also, investors bring in second guessing and opinions that weigh heavily towards finance / return on investment (ROI) and marketing. Whereas at an early stage product development and proof of concept are more important.

Who are your main competitors? How is your business different from them?
Essentially, we are in Blue Oceans as our product has no competition. All existing portals target full-time employment and interns (three months and above). Colaborate is the only one targeting gig workers and popularising the gig culture. We will also be the first to spearhead the ‘Gig Economy’ that’s trending globally and set to take India by storm. So, we have absolutely no direct competition in India.

Internationally, there are products that are similar but due to our Bids & Offers (with barter) component, it makes us unique. We will also be adding more unique features gradually. Also, bear in mind that the app was planned and being developed well before the new Social Security Code was released. No one could have imagined that these radical labour reforms would be announced. So we have the first mover advantage and intend to increase the lead.

Some state governments as well as individuals like actor Sonu Sood have already launched apps that connect businesses with people looking for work. How does your platform compare with such existing offerings in the market?
Yes, there are apps, too many actually, that connect companies to those looking for full-time employment and internship. We are not in that space. Our focus is on getting the gig economy and gig culture to take off in India. The Colaborate App clearly will tap into grossly underutilised resources: retired professionals, stay-at-home moms, teen students and out-of-work professionals. It will also catalyse restarting the economy as large and small businesses will be able to mitigate the risk by lowering their fixed manpower costs.

When are you planning to launch the Colaborate platform? In which markets?
As soon as we get the approval for the SMS template from the government. The metros are the primary target and part of our go-to-market strategy. However, in the long term we want to penetrate villages and Tier III cities with less than 10 lakh population. We want to connect companies to them as we feel they have a lot of underutilised talent and hold tremendous potential.

Any plans launch it in international markets as well?
We are already in talks with potential partners in the US, UK and Canada. However, these markets already have a developed gig economy, so despite our unique app, it would be tougher to penetrate. The more exciting markets for us are Nepal, Sri Lanka, Bangladesh, Malaysia, Indonesia and Philippines. We are still in the process of identifying potential partners.

What's your go-to-market strategy for this platform?
The app will not be available on the play store or the cloud and is only available via an invitation link. Non-profit Institutes, Associations and Federations will be authorised to invite their member organisations. The members that sign-up will invite LAs (ex-employees, students known to them, family members of employees etc.) to the platform. We will also authorise colleges and NGOs to invite their students and beneficiaries as LAs. Besides this, the parent organisation will also invite organisations and appropriate LAs on their own.

Tell us about the various revenue streams from this app?
Colaborate is a subscription model and here we have two main revenue streams – annually Rs 250/- from LAs and Rs 4,750/- from companies. This is the introductory pricing for companies, later we will increase their subscription amount to a more practical number. We have smaller revenue streams in the pipeline viz. pay-per-use for companies (Rs 10), advertisement, SMS / email blasts and promotional video uploads for LAs (Rs 50).

Take us through your growth strategy and expansion plan over the coming months in this fiscal and next.
Over the next four months, we expect the sign-up to be small but steady and are targeting a little over 1,000 companies and 50,000 LAs. Next fiscal, we should onboard close to 10 times that number – this is factoring the app gaining popularity, moving to other industries like retail, travel, manufacturing etc. and most importantly the economy kicking in.

How many businesses and gig workers/ professionals are currently enrolled on your platform?
The actual launch (app ready for download and use) is still to happen. However, we did a soft launch on October 16, 2020, and we've been conducting presentations on the App since. So far, we have received strong verbal commitments from over 1,000 hotels and restaurants -- reputable chains both domestic and international. We have not pitched Colaborate to LAs directly but over 20 colleges and NGO are eagerly awaiting the app and through them, our guess is about 5,000 LAs should sign up in the first month itself.

What steps have you incorporated to ensure users of this platform are verified businesses and individuals/ professionals?
Colaborate will have to be downloaded via an invitation link and companies will be directly invited by HTI or authorised Associations and Federations. Liberated associates (LAs) too will be invited by HTI or by companies that have signed up on the app. LAs will have to upload their Aadhar, PAN Card and Certificates to be scrutinised by companies. LAs could boost their demand by uploading a Police Clearance Certificate too. Later, the ‘rating system’ would provide a fair idea as to how professional the company and LAs are.

What measures have you taken to ensure data privacy and prevent data misuse?
All data has been protected using advance technology and security features. However, we suggest that companies or LAs do not share confidential information that would be a health or safety risk, or photos/ videos that could be misused. We are also not asking for details linked to credit or debit card.

How do you ensure businesses are offering fair compensation to gig workers/ professionals on the platform? What SOPs have you put in place to address this issue?
Going by the brand name Colaborate, it’s imperative that the platform creates a win-win for all. We will be working with Associations/ Federations to address this concern and also take regular inputs from LAs to ensure that certain lower ‘circuits’ are not breached. About six months into the launch will allow us to understand the prevailing Bids & Offers (history) and provide benchmark ‘rates’ – High, Average and Low. These rates will naturally fluctuate with the season/ demand and supply. Overall, Colaborate would not like to ‘mess’ with free-market demand and supply, but we would stay alert to groups or cartel formation and take appropriate action to ensure fairness.

What measures have you put in place to ensure transparency in dealings between businesses and gig workers/ professionals?
We are also encouraging LAs and companies to deal only through the app so that both will be secured as there’s proof of the gig requirements and remuneration. This also provides us the deal (Bids & Offers) details. Six months into the app launch, we will get a certain history of prevailing Bids & Offers and this will be made visible to all. Based on an algorithm, we would provide the 'High', 'Average' and 'Low' rate for a designation during the season.

How are you planning to address the Red Flags (issues) that'll be raised by businesses and gig workers/ professionals on your platform while availing of each other's services?
Colaborate is the liaison, the connector or the ‘market place’. Overall, we will not be getting involved with disputes as we are not providing services on a commission basis. However, we are also providing the framework for free and fair dealing and based on loopholes spotted, we will keep upgrading the app.

Some systems provided are the Rating – now if an organisation is constantly treating LAs badly or delaying/ denying payment, the other LAs will avoid them. Colaborate will also take action against such organisations by removing them from the app. Similarly if an LA gets a bad rating for punctuality, professionalism or being a bad team player, s/he will not be in demand. And if an LA is ‘blacklisted’ by three organisations that s/he does gigs for, they will be off the app.

There is a perception that businesses exploit workers/ professionals in the name of gig assignments – more work, less compensation. What's your take on this?
Perspective is important. If you compare the gig culture to permanent employment, it appears exploitative. In traditional employee-employer relationship, if an employee wants to leave a company, s/he resigns. Can an employer who does not need an employee just sack them?

If an organisation does well, employees feel ‘entitled’ to a higher bonus or incentives. Yet if an organisation is crashing, they can’t reduce salaries or benefits. Staff often refuse to multitask e.g. a driver won’t help with loading; a cook refuses to serve. Now, in the gig culture, the company will offer less if they are doing badly. They will expect multitasking. They won’t hire if there’s no work.

In fact, companies are also treated this way by consumers. If they don’t give them what, where, when or how they want - that too at a price they want - they take their business elsewhere. An organisation has to stay ‘relevant’ by meeting customer expectations; is that exploitation by consumers? And if an organisation is going bankrupt, then who suffers?

Consumers go to the competitors. Owners suffer for some time before they set up another business. The biggest to suffer are the staff – look at the graveyard – Kingfisher, Centaur Hotel, news media (online, print and television) companies and the Mills of Mumbai.

There are currently no government rules/ guidelines that protect the interest of gig workers/ professionals. In such a scenario, how do they protect their professional interests?
Colaborate will be building in various schemes like we have tied up with an insurance company that will give us accident cover of Rs 1 lakh for just Rs 200. The Training Tsunami is offering online skill upgradation programmes. We intend to tie up with the State Bank of India (SBI) for PPF (voluntary contribution), a finance company for housing and vehicle loans, and an insurance company for health/ medical cover. Naturally, since we are the pioneers in the organised ‘gig economy’ space (in Asia), we need out-of-box thinking and solutions. Given the era we live in, I don’t think it will take too long for dynamic and progressive organisations to Colaborate with us.

What's your strategy to keep exploitation of gig workers/ professionals at bay? What processes have you put in place to fool proof this aspect?
As far as exploitation goes, I have answered it above. With respect to ‘fool proof’, we would be the biggest fools to think we have a fool proof system in place. The idea is to be alert and responsive – spot the problem, and respond with a fast and practical solution.

Cartelisation (by business owners) is another concern associated with such platforms. How do you intend to deal with this issue?
In an app like ours, cartelisation is difficult given the fact that there are multiple buyers and sellers. However, as mentioned earlier, if we sense this, we will respond with a solution as cartelisation is not collaborative and that can’t be tolerated.

While businesses are likely to benefit from on-demand hiring and reduce their employee costs, how will the gig worker/ professional benefit from it financially?
I don’t think business will save too much in terms of costs as they will end up providing higher remuneration to make gig work lucrative. But the main benefit is a shift from the ‘fixed cost’ of manning to a variable component. So, higher sales will call for higher manning and vice versa. This increases the probability of the business being sustainable, viable and flexible. The business can respond faster to shifts in market demand and supply, and the vagaries of nature.

On the other hand, the gig worker may not earn more – that’s not the idea. The idea is to offer them flexibility to choose the time, place, duration, organisation and compensation that they wish to work for. They can change fields easily. They are not tied down by contracts or long-term commitments. Gig satisfaction is the aim and it is to be provided through freedom – liberation.

How will your platform help gig workers grow professionally considering it's not full-time employment, there is no concrete visibility on increasing one's earnings, there will be no climbing the ladder (professionally) – particularly for lower end jobs?
Clambering for promotion is a primary reason for dissatisfaction at the workplace – ruins team work too. Often organisations even promote only to ‘hold on to staff’ and the staff end up doing the same job as before. I’ve seen letters from organisations that effectively said: “You are promoted, but will continue to do the same job as before and will not demand a different seat/ cabin or more staff under you…”

In a gig economy, a person won’t be hired for a senior position than the one he/ she is qualified for. How do they grow? Simple, they undergo training programmes and/ or take up the senior position, initially at the old ‘rate’ or even a lower fee. They learn the ropes like an intern and then when they are actually qualified, they ‘bid’ for a higher fee. It is like a new and improved product or service – the market must recognise that the product is indeed a better product before they will pay more for it. So initially the company offers it at a lower rate.

What's your timeline like for making this venture profitable? What are the revenue projections like?
We aim to be PAT positive in roughly 18 months i.e. March 2022. However, we have plans to expand internationally – Asia and Europe, so depending on the timeline and budgets, that are yet to be finalised, we could be delayed by another 12 to 18 months. Revenue projected in the first 12 months is Rs 14 crore and we aim to double it in the next 12 months.

What are your business/ services expansion plans and timeline for achieving them?
We want to dominate and consolidate our position in the Indian hospitality space in the next five years. In the first two years, we also aim to make our presence felt in travel, retail and entertainment with a similar product. Six months later we will be releasing a product with specific iterations to suit the manufacturing industry and have begun working with a Subject Matter Expert (SME) on this. Once proof of concept has been established, we aim to enter other markets.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

“India has lost a huge opportunity to convert outbound travellers into domestic”

It’s all coming back but not as I’d imagined. While domestic travel is witnessing some activity, it’s still to pick up steam. I think it will happen gradually, feels Himmat Anand, founder, Tree of Life Resorts. In this candid conversation, Anand speaks about the hospitality market scenario as India unlocks in phases, consumer behaviour, present and future business prospects, manpower issues and other challenges surrounding the hospitality, travel and tourism industries. Edited excerpts…

It’s been a little over two months since Tree of Life Resorts opened for business at some locations. How has the journey been so far?

 

Tree of Life Resort & Spa Jaipur was the first one to open and it has taken-off really well. In fact, I’m quite amazed with the market response. Jaipur is a clear indication of the fact that if the source market is closer the resort will do much better. The Jaipur resort continues to clock between 65% and 68% occupancy levels at very good average room rates (ARRs).

 

We opened the Tree of Life Vantara Resort, Udaipur on July 1, 2020 followed by Tree of Life Kipling Jungle Lodge, Ranthambore on August 1, 2020. It’s taking time for business to pick up at these locations. We are doing around 20% occupancy which is alright given the current market scenario.

What hasn’t worked for the Udaipur market?

For Udaipur, Gujarat is the main source market. We were expecting the Gujarat market to respond quickly but that hasn’t happened as people are still very cautious about travelling. Mumbai is another good source market for Udaipur however, the coronavirus pandemic situation is quite dramatic in the commercial capital right now and people are still apprehensive about travelling.

 

You were among the few hoteliers to announce an opening date well before the unlock process started. What made you take that decision? How has it panned out finally?

 

We took the call to open our resorts in May 2020. That’s because businesses have to open and there is no such thing as ‘the right time to open’. You can either keep waiting or take the plunge and chalk out your own destiny. Yes, we were among the first ones to open for business and the decision was based on certain calculations like the lockdown will start to ease out starting June first week. Our assumption was that Punjabi households of the National Capital Region (NCR) will definitely head out for a short vacation with family. That’s something I was banking on in addition to the Gujarati households who’d venture out, for obvious reasons, after being confined in their houses for an extended period.

 

While the assumptions did work for the Jaipur market it didn’t pan out in the way we imagined for Udaipur. We were to open Jaipur resort on the June 19, 2020 weekend. But we’d already received booking from June 15, 2020 onwards as a result we opened for business before the targeted date. The guest profile was 100% domestic leisure travellers mostly from NCR-Gurugram.

 

While business gradually picked up in June, we closed July with 68% occupancy and an ARR of Rs 10,800 for Tree of Life Jaipur. The numbers were way better than what we’d done in July 2019 wherein the occupancy levels were between 45% and 50% at ARRs of about Rs 8,000. On a year on year basis, ARRs were higher by 30% to 35% while occupancy levels were up 36% over the same period last year.

 

We’ve done phenomenally well during July this year in Jaipur resort and August numbers are looking equally encouraging. What’s surprised me the most is that the luxury pool villas selling at Rs 14,000 a night (including breakfast) were the first ones that got sold out. In fact, even today, there are little chances of a guest getting a luxury pool villa unless pre-booked well in time.

 

Are travellers booking directly or coming from other trade channels?

 

Most of them are direct followed by bookings through the online travel agencies (OTAs). What also worked for us is that during the lockdown period, we aggressively used the social/ digital media platforms like Facebook, Instagram and Linkedin to ensure top of the mind recall for brand Tree of Life resorts across locations.

 

Every day there was some or the other activity planned on these platforms and we were approaching the business as if our hotels are still running. This not only ensured visibility/ recall but also helped us stay connected with the market. Our social media connect was very strong and the strategy has paid off well. So, when the unlock happened bookings began flowing in from the very next day we opened for business.

We also went with aggressive pricing on the OTAs. We started with heavy discounts to the tune of up to 50% in June, brought it down to 40% in July and cut down further to about 30% in August. I think by October the overall discounts will be down to the normal 10% to 15% levels.

The customary annual price hikes starting October will be a strict no-no in that case?

Beggars can’t be choosers so we’ll have to accept whatever best room rates we can get from the market. All is good as long as the hotel is able to meet its expenses and pay salaries to employees. Fortunately, we don’t have the burden of interest payments to banks. The loans on our books are internal as we are still a family owned company. So I don’t really have a bank sitting on my head every month seeking interest payouts.

 

There are talks about 40% to 50% of hotels going out of business owing to financial stress.

 

That’s indeed going to happen. In our case, while we have a loan to pay back, we are very fortunate that if I can’t pay today I have the flexibility to pay it later. There is no pressure on my business and we can breathe easy in the current financially stressed market conditions. That doesn’t mean we are taking advantage of the situation, loans will be paid back and there are no two ways about it. Having a breather for the next six months is a big advantage. I will be able to restructure the debt and pay it back thereafter. I think that's a huge positive for our company.

 

Why in your view are people still averse to travelling/ holidaying?

The overall scare in people’s mind about travelling, in my view, is mainly due to the continuous hammering across media outlets about the number of people infected by the coronavirus. I think India is way better off than most nations given the size of population. However, the media hype has put a spanner and delayed revival of the domestic travel market.

 

Secondly, there is a huge outbound market comprising 20 million Indians who travel overseas. However, due to lower number of operational flights these travellers are unable to pursue international travel. My assumption is that nearly 3 million people would travel during the July to December months.

What’s the hurdle in tapping this huge market of outbound travellers?

 

I’d thought that the outbound tour operators will actually tap this captive market and convert them into domestic travellers. That hasn’t happened because the outbound tour operators have not been as proactive on that front as they could have been. Inbound tour operators catering to international travellers are anyway stuck and can hardly do anything in the domestic travel segment given its peculiarity and the need for client relationships.

 

I think India has lost a huge opportunity in activating and converting outbound travellers into domestic travel. However, there is still time because I don’t see the frequency of international flights happening till November first week or so. We still have two to three months in hand and the outbound tour operators need to wake up to this opportunity.

 

How are guests responding to all the safety and hygiene practices being showcased by hotel companies?

The hotel industry has got egg on its face as far as health, hygiene and safety matters are concerned from a customer’s point of view. I think industry players have overhyped the situation demonstrating a plethora of practices and whatnot. But let me tell you, the customer isn’t really interested in these cosmetics. All that the guests are looking for is basic hygiene including the standard guest onboarding procedures being prescribed by the regulator.

 

By creating all the hype about hygiene practices, the hotel industry has actually scared away potential guests.

 

Hotels have anyway been practicing the highest standards of hygiene and cleanliness irrespective of COVID-19 pandemic situation. There was confidence already built in the guests’ minds about the hotel industry’s focus on hygiene and cleanliness so what was the need to make such a song and dance about it anyway.

What has been the experience like on these matters in your resorts?

At Tree of Life resorts, we apprise our guests about the prescribed precautionary measures being taken at our properties. Thereafter, if the guest(s) asks for any additional precautionary measures to be taken we are more than happy to do it.

 

For instance, we have cameras installed in our kitchens and the guests have the option to watch the food preparation on their mobile phones. Similarly, all rooms are sanitised before the guests walk in and we also give them the option to re-sanitise the rooms in their presence. Not more than 5% of the guests have asked for the rooms to be re-sanitised.

This is a clear indication that the guests’ trust and resilience is already there and she/he is very happy with the basics being done at the resort/ hotel premises.

 

I think the guests aren’t as paranoid as the hotel industry has made it to be. They are coming to a resort to relax, walk around and experience the open space, something they aren’t able to being confined in their residential apartment. We have taken all necessary precautionary measures and I can confidently tell you that we have not had a single complaint about lack of hygiene matters on the resort premises.

 

Another aspect to be mentioned here is that while the hotel is responsible for the guests’ safety, the guest is equally responsible for their own safety in the resort. It cannot be 100% my job. The guests have to play their role and take necessary precautions like wearing their masks at all times, washing their hands, maintaining physical / social distancing and using sanitisers when in public places.

 

Travel was also curtailed due to restrictions imposed by local administrations in certain states / locations / regions?

Yes, these decisions have impacted travel plans. Local administrations need to take a stand and stick to it like Himachal Pradesh (HP) did saying no tourists will be allowed till August 15, 2020. However, there was a flip-flop situation in Uttarakhand every second day. Same was the case with Goa, Kerala, Karnataka and Andhra Pradesh (AP) if I remember it right.

 

I think the state governments also need to make up their mind. While lockdown happened very efficiently for a country of our size the unlocking exercise has made a total mess of it. Look at the situation with restaurants, while food can be served liquor has been banned. I just don’t understand the logic behind this move. Our unlocking has been a total disaster for the Indian hospitality and food service industry.

 

Of your resorts bouquet, only three are currently operational?

 

Four actually. The Tree of Life Grand Oak Manor, Binsar Wildlife Sanctuary has been opened for guests as well. The ARRs are low at about Rs 4,500 in Udaipur, Ranthambore and Binsar but I am hoping business to pick up as tourists from Gujarat seem to be warming up to the idea of holidaying.

Three more properties viz. two in Kerala and one in Dehradun will open in September. So all resorts in the Tree of Life portfolio will be operational well before the business season that’ll kick start in October.

Are the resort operations sustainable at such room rates?

 

Not really. We will be losing money for a month or two. Right now profit is not a consideration for Tree of Life. I am willing to risk running the business for a small loss for two or three months. I will take that chance because I cannot wait till October, November or December to keep thinking about how to move the business ahead.

 

My focus currently is to build occupancy across my resort properties. Average room rates are not really my target because we need cash flow. Besides, it’s occupancy that will bring in the cash flow not ARRs and I’m very clear on that. My objective is, If I have to discount, I’ll discount to ensure cash flow and I’ll bring back the pricing eventually when the market starts to look up.

 

A lot of hotel companies have cut down on staff strength.

 

All hoteliers have had to retrench/ lay off employees unfortunately because it was a business necessity during the lockdown period. We all had no choice as the market scenario was such. It wasn’t done to save money. There was no money to even pay salaries.

 

As and when the opportunities are arising I’m reopening the properties with half the capacity. We are also going back to our staff and asking them to rejoin. While I still can’t pay full salary it’s important to start somewhere. For me, it’s not a business obligation but a moral one towards my people.

 

I must also admit here that we haven’t been able to pay pre-COVID level salaries to our staff. However, with business picking up at our Jaipur property and hopefully at our other resorts in the coming months, we are working on gradually bringing the salaries closer to the pre-COVID scale.

 

Having retrenched earlier, hotel companies are now rehiring for the same positions albeit at much lower pay scale and unreasonable preconditions?

 

In fact, I am amazed looking at the approach by some multinational hotel companies / brands coming out with fresh/ new recruitment advertisements for all positions in their respective hotels. This is a very disappointing trend I am seeing currently on staffing.

 

Ideally, preference should be given to existing employees who were retrenched and only after they refuse should the hotels look outside. I don’t see any reason why former employees will not join considering they have been out of work for long and they have a family to support.

 

Hotels with significant debt on books are uncertain about their existence leave alone survival. What’s your advice for them?

 

Keeping this thought process in mind, I’ll respond in two parts. One thing that’s happened with us is that in the last two months, a number of asset owners have expressed interest in being a part of the Tree of Life network. Reason being that as an independent hotel operator, as you rightly pointed out, their survival over the next three to four years is going to be very difficult.

 

I’m a small inventory hotel chain with 10 to 20 guestrooms in each property that we currently operate. Independent hotel asset owners want to be associated with our brand and leverage on our strengths. As we speak, four contracts are under advanced stages of discussion and by next month we should be adding four or five properties to our portfolio of resorts.

 

So at a time when business is shrinking for a lot of hotels, we are confident to be able to generate enough revenues and we know that very well. While there are a lot of such discussions we may not sign all of them. We have shortlisted five that fit very well in the scheme. Our feeling internally is that we should be able to work together very well with these properties. That’s one part of the story.

Now let me answer the second part. I think the only thing that can give hotel owners sleepless nights is loan payback. So asset owners without any loan liability on the property should not have much of an issue right now. There is no need for them to get adventurous particularly those located in the Tier II and Tier III markets. That’s because the moment you’ll open there will be some of the other expenditure that will come up and that’ll kill you for sure. So it’s best to remain shut till October - November. Also, if the asset owner is among those thinking about making a profit by opening then let me tell you upfront, no hotel will ever make profit over the next six to nine months.

 

However, those servicing loans on their respective hotel assets will have to find a way to restructure the debt. For these asset owners survival is all about managing the loan because I don’t think business is really a criteria for them right now. My view is that many will not be able to restructure loans and a lot of distress sale assets will be up for grabs in the coming months because the Reserve Bank of India’s interest moratorium ends on August 31, 2020. While the RBI has offered a one-time debt restructuring option it is unlikely banks will extend the facility to hotels and restaurants owners considering long term uncertainty looming over these businesses.

 

Given the current and future industry scenario, what’s going to be the fate of aspirants currently studying hotel management and those who’ve graduated this year?

I think these are tough times for students especially those graduating this year irrespective of the education stream being pursued. While every other industry is facing challenges the level of pain differs. Having said that, there are industries especially in the digital space that have gained significantly and are busy chalking out plans to tap the future growth opportunities.

 

While hospitality, food service, travel and tourism are among the badly hit my view is that over the next couple of years every sector will go through a restructuring process and cost rationalisation will be key to accomplish this exercise. However, hospitality industry aspirants and professionals need to keep this in mind that we are a part of an industry that thrives on personalisation and guest experience.

Irrespective of the level of digitisation or automation that one can think of it cannot overlook the fact that hospitality is a people’s business and will remain so for years to come. While percentages can vary, I do not believe that the hospitality industry can be do without its people, especially the leisure segment. The room to staff ratio will obviously undergo a significant change particularly in the case of large inventory business hotels.

All in all, the next 24 months are going to be challenging for every business including hospitality, travel and tourism. However, I’m not only confident about a revival in the overall market scenario two-and-a-half years from now but also the fact that there won’t be any dearth of opportunities for hospitality industry aspirants and professionals. Students currently pursuing should utilise this time to make themselves future ready while working professionals will have to reinvent and find newer ways to stay relevant and thrive in these challenging times.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

50% of hotels in India in danger of getting sick over the next six months, says Patanjali Keswani, CMD, Lemon Tree Hotels

Fifty percent of hotels in India, according to a top hotelier, are in danger of getting sick over the next six months. And this is mainly due to leverage and liquidity related issues.

Expressing concerns on the overall health of the Indian hospitality industry, Patanjali Keswani, chairman and managing director, Lemon Tree Hotels Ltd, said, ”Short term demand destruction over the next six to 12 months, without an extension of the moratorium, will certainly lead to permanent supply destruction. What this basically means for the industry is that there will be a 10% to 25% reduction in (hotel rooms) supply in the branded hotels space in India by next year. While some of them may come back but new supply will be impacted severely. As far as I know, very few people, if at all, are building (new) hotels or are continuing to build hotels. Right now there are 165,000 hotel rooms and my reckoning is that two years from now there will be anywhere between 130,000 to 140,000 rooms operating.”

And if that happens, added Keswani during an earnings call earlier today, I reckon that hotels that remain operational will not witness a big drop in room rates. “So, maybe this October the pricing (rates offered to corporate clients) will remain the same or may decline marginally compared to last year. However, next October the room rates will certainly bounce back significantly,” he said in response to an analyst’s query on the outlook for corporate rates that get renegotiated annually during this period.

Keswani said that any hotel company that has operating hotels two and a half years from now, will be in a market scenario where supply would have reduced significantly. “While I cannot speculate on the increase or decline of demand for hotel rooms, I know for sure that there will be an enormous reduction in supply of branded hotel rooms in India. Also, whichever corporate that I have spoken to, all their employees are of the view that that cannot go to work. My expectation is that from October next year the market will witness a very large amount of domestic travel. Fear has to go, cure has to come, vaccine(s) may or may not come but domestic travel will kick-start and there is no doubt in my mind,” he said.

The current market scenario has got every organisation in the cash conservation mode. However, there are also talks about an opportunity for companies sitting on cash to acquire hotels that are under financial stress.

”We already own 5,200 hotel rooms and are building another 700 plus rooms so we will be closer to 6,000 guestrooms soon. I don’t think we have an appetite to acquire assets. Having said that, a fund is already in talks with us to manage their hotel assets portfolio. The hotels will be acquired by the fund and we will be managing their properties. We are looking at that opportunity and are hoping that in the next two months we will be able to do a term sheet with them to manage their hotel assets. This (deal) will significantly expand our managed hotels portfolio under the Fleur Hotels joint venture,” said Keswani adding that the focus going forward will be on growing through management contracts, lightening the balance and moving owned assets into Fleur Hotels and its possible listing in the next few years.

Lemon Tree Hotel is also envisaging delays in construction activities as a result of which opening of hotels that are currently under development will take longer. The hotel chain has been developing a five-star deluxe hotel under the Aurika brand, located in the vicinity of the Mumbai International Airport. The largest hotel in Lemon Tree’s portfolio in terms of the number of guestrooms, this property was to open in the third quarter end of calendar year 2022.

“However, for the last five months hardly any work has been done at the site. At Rs 2 crore a month, the expenditure today is not very significant as we are building the shell of the hotel in the vicinity of the Mumbai International Airport. We have kept the project work on with an expectation that it will be delayed by six to nine months. We will take a call in December this year based on what we see because our existing hotel Lemon Tree Premiere in Andheri, Mumbai is already doing 60% occupancy at an average room rate (ARR) of close to Rs 4,000. So, if we feel Mumbai is recovering, and it normally recovers first, we will accelerate the project development.

On the business front, the country’s largest mid-market hospitality chain has operationalised close to 90% of its hotels in the portfolio. It is currently witnessing occupancy levels of about 38%. The hotel chain was operating 3,700 hotel rooms in the first quarter and the number of guestrooms increased to 4,600 in the second quarter.

”While rooms inventory has gone up by 900, we are hoping occupancy to pick up over the next two to three months,” said Keswani adding that business form quarantine guests witnessed a slight de-growth in July. “But that was compensated by pick up in online bookings,” he said adding that market sentiments are undergoing a change and business from quarantine guests is only a filler now.

Online booking stood at 70 per day in April 2020, however it has picked up gradually and currently stands at 300 bookings on a daily basis across Lemon Tree’s hotels network, said Kapil Sharma, chief financial officer, Lemon Tree Hotels Ltd.

The room rates from online bookings, Keswani said, is between Rs 2,800 to Rs 4,000. “A large part of the bookings is in the Rs 2,800 bracket as these are people looking for a break and are staying at the hotel with wife and kid(s) over the weekend. It’s the micro, small and medium enterprise (MSME) segment that’s picking up 100-150 rooms a day and paying north of Rs 3,500,” said Keswani.

Business from online bookings stood at between 35% to 37% for the hotel chain during pre-COVID times. Another 35% was coming from large corporates, business from MSMEs was at 30% and 10% was from other categories like meetings, conferences and incentives.

“Contrary to what I have been reading about complete distress in the market, I find that while the large corporates have not started travel, their business continuity teams are travelling and staying in our hotels in Pune, Bengaluru and Hyderabad. However, the MSME sector has started travelling and to me that is an early indication of something to look forward to,” said Keswani.

Lemon Tree Hotels is also planning a rights issue though there is no timeline finalised for the same as yet. While a board approval for the rights issue is already in place and the company management planning to hold a board meeting next month and take a final call on this. “It should roughly take two to three months,” said Sharma.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Indian hospitality industry on the brink of collapse, says Hotel Association of India (HAI)

The Indian hospitality industry is on the brink of collapse and is in dire need of support from the government and the Reserved Bank of India (RBI) to be able to get back on a revival path. According to the Hotel Association of India (HAI), four key factors are responsible for the deteriorating health of the hotel sector and the situation is only getting more challenging with every passing day.

The apex industry body pointed that being a discretionary spend, there is negligible demand for hotel rooms and services. Absence of air travel, corporate restrictions, cancellation of holidays, state lock-downs and imposition of quarantine on travellers have only added to the turmoil. Furthermore, hotels are bearing the brunt of fixed costs to the tune of almost 70%, which largely comprises payroll expenses and government levies.

Being capital intensive with a long gestation period banking on high cost, short-term debt funding has become a major peril as well. Topping it all is the negative outlook on the industry making it unattractive for lenders thereby leading to a liquidity crunch and increased rates of interest to cover for the perceived risk.

In such a scenario, the Indian hotel sector will collapse if not supported by the Government and RBI, said HAI in a statement earlier today.

The COVID -19 pandemic, HAI said, has led to demand destruction in excess of 90% for the tourism and hospitality sector which employs nearly 4.5 crore people; provides livelihood to around 16 crore people and contributes 9% to India’s gross domestic product (GDP).

Citing a recent McKinsey study, the apex body said that airlines and hotels were the worst impacted sectors in India with around 75% output decline in the first quarter of fiscal 2020-21 over fourth quarter of fiscal 2019-20. Also, the hotel sector features in the list of strained sectors on debt service coverage ratio (DSCR). The overall loss of revenues for the Indian hotels sector in the year 2020 is pegged at Rs 90,000 crore.

While the RBI has announced an immediate term to avert the crisis by allowing relief on Loan moratorium on interest and principal repayment for three months (later extended to six months but that will only help the industry to survive in the short term which may not suffice for revival and subsequent thrival of Indian hospitality that has attained great heights globally for its service standards.

Continuing with its efforts to highlight the hotel industry's plight, the apex industry body, has been recommending more relief measures for the survival, revival and thrival of the sector in the hope of a much needed support from the government at this juncture.

"The hotel industry is now solely focused on survival and has been requesting the RBI to extend more proactive support. The current debt levels in the organised part of the industry (which is less than 10% of the total) stands at Rs 45,000 crore. Unfortunately, an immediate term solution will only defer the crisis as what is needed is a longer-term solution spanning the next 24-36 months which solves for both stakeholders: the borrower (unable to pay the interest and principal for the foreseeable future) and the lender (loans becoming NPAs)," HAI said in a statement.

In this regard, HAI is recommending relief - for those companies with good credit history i.e. Standard Assets as on March 31, 2020. To this effect, the apex body has proposed an extended tenure and a staggered approach to the applicable rate of interest in what it anticipates will be the three stages for a return to normalcy.

-- Survival Phase (next nine months): The moratorium on interest and repayment of principal is extended for the entire FY21 i.e. till March 31, 2021, the interest due is added back to the total principal outstanding and the loan term extended by 12 months. This will solve the current cash crunch as there is expected to be almost no demand for FY21.

-- Revival Phase (following 18-24 months): Interest Rate @ Repo Rate + 200 bps: the lending institution can fund this by borrowing from RBI without being out of pocket.

-- Thrival Phase: At MCLR as the market improves and performance of the industry reaches 50-70% of Pre-COVID levels (expected 30+ months).

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Brookfield-owned The Leela Group is front-runner to manage Sukhani Group’s erstwhile JW Marriott Jaipur Resort & Spa

A handful of international and Indian hospitality chains are said to be vying for a management contract of the erstwhile JW Marriott Jaipur Resort and Spa. While names of international brands are still under the wraps, speculation is rife that the two luxury hotel operators viz. The Leela Palaces, Hotels & Resorts and The Indian Hotels Co Ltd (IHCL) are among the homegrown brands pursuing the property.

In fact, industry sources are certain that The Leela Group, now owned by Canada-based Brookfield Asset Management Inc, may have already succeeded in bagging the management contract from spa resort asset owner viz. Tulsi Palace Resort Pvt Ltd, a part of Sukhani Group of Hotels.

The possibility of The Leela Group branding and managing the spa resort in Jaipur is high considering it doesn’t have a flag in that market yet. Its only presence is a little over 400 kilometers away in the form of The Leela Palace Udaipur. Located on the banks of the majestic Lake Pichola, this 80 rooms five-star palatial hotel offers stunning views of the lake, City Palace and the Aravalli mountains.

UPDATE on September 28, 2020.

In a statement issued on September 28, 2020, The Leela Palaces, Hotels and Resorts said that the hotel chain is expanding its portfolio and has signed an agreement with Tulsi Palace Resorts Group, owners of the erstwhile JW Marriott Jaipur Resort & Spa, to manage the 200-rooms property in Rajasthan’s capital city. The resort spa which is currently not operational is set to undergo enhancements over the coming months and will be branded upon completion of the renovation by early 2021.

Establishing a presence in the Pink City would definitely rank very high for The Leela Group management and that probably explains why the hotel chain is understood to be pursuing it very aggressively. Queries emailed to Anuraag Bhatnagar, chief operating officer, The Leela Group remained unanswered.

As for IHCL, the Tata Group’s hospitality business vertical already has four operational hotels viz. Jai Mahal Palace, Rambagh Palace, The Gateway Hotel Ramgarh Lodge and Devi Ratn - IHCL Selections in the Jaipur hospitality market.

Last year in May, IHCL had signed new management contract (its seventh hotel in Jaipur) for a Vivanta hotel in Jawahar Circle, Jaipur. This 200-guestrooms greenfield hotel asset is being developed by Kalpsagar Pvt Ltd and slated to open sometime in 2023. The Indian hospitality chain added another management contract in February 2020 with Kanha Hotels & Spa Pvt Ltd's brownfield development featuring 250-rooms. The Taj branded hotel is also expected to open sometime in 2023.

IHCL has pursued a multi-property strategy across various markets in the country, and the hotel chain claims to have nine properties (operational and under development) across its brands in the Jaipur hospitality market. It thus remains to be seen if the Taj Group management would want to make further additions in its approach to replicate this strategy in the capital city of Rajasthan.

An IHCL spokesperson said in an email response, “We do not respond to market speculation, we will not be participating in this story.”

The luxurious JW Marriott Jaipur Resort & Spa featuring 200 guest rooms, owned by the Sukhani Group of Hotels, was launched amidst massive fanfare back in March 2018. Earlier this month, the partnership between Sukhani Group's Tulsi Palace Resort and the Indian subsidiary of Marriott International Inc was called-off and Marriott vacated the spa resort effective July 7, 2020.

This long-term relationship between the American hospitality giant and the Jaipur-based hotel asset owning entity was to last for 30 years. However, the short lived alliance ended within a little over two years of being together.

Both Marriott International and Sukhani Group are yet to issue an official communication about their breakup. Marriott International has however removed JW Marriott Jaipur Resort & Spa from its list of properties on www.marriott.com. In fact, this spa resort was showing up on Marriott’s network till a week or 10 days ago. And now only four hotels viz. ITC Rajputana, a Luxury Collection Hotel, Jaipur; Four Points by Sheraton Jaipur, City Square; Jaipur Marriott Hotel and Le Méridien Jaipur Resort & Spa feature in the property search results. This is pretty much an indication that the Jaipur resort and spa is out of Marriott's hotels network.

Considering negotiations for the new management contract are at a very advanced stage, the asset owners (Sukhani Group of Hotels) along with the new hotel management company are likely to announce the relaunch under a new brand in the coming weeks.

What really went wrong with this hotel brand and asset owner partnership and who was at fault couldn’t be ascertained. In fact, an FIR filed by the asset owners against Marriott India and its hotel employees has been quashed already by the Jaipur Bench of the Rajasthan High Court.

As per an ANI report, Vikram Sukhani (on behalf of the asset owner of the luxury five-star property JW Marriott Jaipur Resort & Spa) had leveled various accusations against the hotel management company (Marriott India) and its employees.

The plea, according to the ANI report, stated that the criminal complaint initiated by Vikram Sukhani falsely and mischievously insinuated that certain employees of the hotel and Marriott India had allegedly conspired and cheated the complainant by misappropriating and siphoning-off monies belonging to the hotel. It was falsely alleged that the said employees conspired with Marriott India to unjustly award bonuses to themselves while at the same time denying statutory bonus payable to other employees of the hotel.

Emails seeking clarity on this issue did not elicit a response from Marriott International’s India office as well as the Sukhani Group of Hotels.

Hotel management contracts typically comprise clauses that are aimed at safeguarding the interest of the hospitality brand and the asset owners alike. Among various terms is one about a lock-in period that penalises the brand or the asset owner for calling-off the association within a specific time frame of property becoming operational.

The compensation to be paid to either party for breach of this specific clause is arrived at after taking into consideration the revenues clocked in by the hotel, the share (percentage) that goes to the hotel brand operator and the asset owning entity and, the number of years remaining in the contract period. 

In fact, the penalty amount could go into crores of rupees if the association between the hotel brand and asset owner gets called-off within the first few years.

The Indian hospitality market has seen quite a few short term associations in the past, the prominent ones being Swissotel Goa and Convention Hotels India Pvt Ltd that merely lasted six months. The other high profile break-up was between Shangri-la  Hotels & Resorts and Mumbai's Pallazzio Hotels & Leisure, a part of mixed-used developer The Phoenix Mills Ltd, that was called-off in nine months.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Accor's loss could be IHCL's gain: Erstwhile Swissôtel Kolkata likely to become a Taj hotel

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

IHCL already has a management contract in place for Ambuja-Neotia Group's luxury resort "Chia Kutir" in Makaibari Tea Estate in Kurseong, Darjeeling. There are strong rumours about a management contract in the works for another luxury resort "Guras Kutir" spread over eight acres at Pangthang in east Sikkim

The Indian Hotels Company Ltd (IHCL) and Ambuja-Neotia Group (ANG) are said to be in advanced stages of discussion for a management contract of the erstwhile Swissôtel Kolkata property. Located atop the City Centre Mall in Kolkata’s New Town area, this five-star business hotel was recently vacated by French hospitality major Accor after the completion of its 10-year management contract tenure.

According to multiple industry sources, if talks between IHCL and ANG materialise, the Tata Group’s listed hospitality company will operate this hotel under its Taj brand.

The reason IHCL is likely to bag the management contract, industry sources said, is that it already has an existing association with ANG for a luxury resort “Chia Kutir” at Makaibari Tea Estate in Kurseong, Darjeeling. In fact, ANG had planned another luxury resort spread over eight acres at Pangthang in east Sikkim. Christened Guras Kutir, luxury resort and spa was to be built in three phases comprising boutique cottages, villas and a premium five-star hotel with a casino. There are strong rumours that IHCL and ANG have already or are in the process of finalising a management contract for this property as well. 

When contacted, an IHCL spokesperson did not respond to a query about their discussions for a multi-property management contract including the erstwhile Swissôtel Kolkata. Over a dozen-odd queries emailed earlier to Puneet Chhatwal, managing director and chief executive officer, IHCL, remained unanswered. The hotel company spokesperson chose to comment on just one query about ‘whether IHCL has bagged the management contract for the erstwhile Swissôtel Kolkata property’ saying, “This is incorrect.”

“The discussions for a management contract between the two parties might still be work-in-progress hence, the denial from IHCL,” said one of the industry sources requesting not to be quoted.

Executives from the Ambuja-Neotia Group could not be reached for a comment. Apparently, recent media reports quoted Harshavardhan Neotia, chairman of Ambuja-Neotia Group, saying that they were exploring possibilities including renewing the management contract with Accor or onboarding a new hotel management company for the erstwhile Swissôtel Kolkata property.

Multiple industry sources, familiar with the development, however, said that the Indian Hotels Company and Ambuja-Neotia Group have been in discussions for a multi-property hotel management contract. “The (former Swissôtel Kolkata) property is becoming a Taj hotel,” said another industry source. Validating it further, another top hotel industry executive said, “This is in addition to a few other (management contracts with IHCL for) Ambuja-Neotia Group’s (existing / under development) hotel projects.”

“Post completion of the 10-year contract with Accor, the (Swissôtel Kolkata) property will open as a Taj branded hotel,” said a top executive from a leading consultancy who is familiar with this development.

Sources added that the Kolkata hotel is non-operational owing to the lockdown situation and is currently undergoing renovation/ refurbishment. “This is likely being done to conform with the Taj brand standards,” said one of the sources.

It is understood that since the management contract tenure with Accor was nearing completion, the Ambuja-Neotia Group had sought a brand other than Swissôtel for the Kolkata property. “I believe the asset owners wanted a Sofitel flag but Accor wasn’t open to this idea. This difference of opinion eventually led to the non-renewal of the management contract with Accor,” said one of the sources.

Debuting in the Indian hospitality market back in July 2010, the Swissôtel brand hasn’t been very successful in the country. In fact, the second Swissôtel property, owned by Convention Hotels India Pvt Ltd, in Goa turned out to be the shortest owner-operator alliance. Swissôtel Hotels & Resorts, a part of FRHI Hotels & Resorts with brands like Fairmont, Raffles and Swissôtel, had pulled out of this five-star deluxe resort at Calangute within six months of launching the property in March 2013. In December 2015, this 135-room resort debuted as the Hard Rock Hotel Goa. 

Later in July 2016, Accor acquired FRHI Hotels & Resorts. However, this development didn’t bring any drastic change for the Swissôtel brand in the Indian hospitality market. Another management contract for a 300-rooms five-star boutique property Swissôtel Grand Mumbai was signed with Ashok Mittal’s Litolier Group in April 2012. However, the hotel hasn’t seen the light of the day as yet.

Non-renewal of the 10-year management contract between Accor and the Ambuja-Neotia Group has resulted in the Swissôtel brand being wiped out from the Indian hospitality market. Also, with no newer signings anywhere in sight, it is going to be a tough road ahead for the Swissôtel brand to make inroads in the country all over again.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

COVID-19 impact: Accor pulls the plug on Swissôtel Kolkata

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

No clarity on the operational status of 300-rooms five-star boutique hotel Swissôtel Grand Mumbai in association with the Litolier Group

Accor, the French multinational hospitality company, has discontinued its association with hotel asset owner Ambuja-Neotia Group for Swissôtel Kolkata effective July 1, 2020. The management contract tenure for this five-star business hotel, according to Accor India, had ended and hence the decision to move on.

Responding to queries, Accor spokesperson confirmed the development saying, “Effective July 1, 2020, following the conclusion of our management contract with Ambuja-Neotia, Swissôtel Kolkata will no longer be a part of the Accor network in India. We are thankful for our decade-long partnership and to the hotel team for their support.” There is no clarity about whether hotel employees are being reassigned to some other property (as and when the market opens up) or laid off post this development.

The Accor spokesperson also did not share any updates on their association with Ashok Mittal’s Litolier Group for a 300-rooms five-star boutique hotel Swissôtel Grand Mumbai that was to come up close to the Mumbai International Airport. This property was announced way back in April 2012 however, a search on Accor’s website showed up no results on the operational status of this hotel. This could possibly also mean that Accor doesn’t have a single Swissôtel flag up and running in the Indian hospitality market anymore.

Swissôtel as a hotel brand has not had a great run in the Indian hospitality market. For instance, the Swissôtel Goa property (owned by Bangalore-based Convention Hotels India Pvt Ltd) launched amidst great fanfare in March 2013 was, in most likelihood, the shortest owner-operator alliance the Indian hospitality market has seen thus far. Swissôtel Hotels & Resorts had pulled out of this five-star deluxe resort at Calangute in Goa within six months of launching the property. This 135-room resort was relaunched as Hard Rock Hotel Goa in December 2015 and it continues to be operated under the same banner.

Coming back to the topic of management contracts, it appears hotel asset owner Ambuja Neotia Group is the first casualty of the COVID-19 pandemic situation that’s creating havoc in the Indian hospitality industry. Accor did not respond to queries seeking clarity on whether the ongoing COVID-19 situation was instrumental in not renewing the Swissôtel Kolkata management contract. The spokesperson also did not respond to queries on the status of other management contracts for its other brands in India that are likely to come up for renewal and whether Accor will let them expire as well.

This development has also brought to light the fact that COVID-19 is not only impacting business for industry players but also souring relationships between the hotel brands and asset owners. The situation raises concerns on the future of hotel management contracts that are up for renewal over the next six to 12 months.

In fact, taking into account the fate of Swissôtel Kolkata, the current market scenario poses a major risk to hotel asset owners as the business impact due to COVID-19 pandemic may result in a lot of the management contracts not getting renewed at all. While some may say there is a brighter side to it because some other hospitality brand/ chain will pick up the property and sign a new management contract. That’s a possibility for sure, but given the prevalent and near future market conditions, it looks unlikely that a new brand would take up the stress when there is hardly any business in the market.

Industry experts are of the view that there is significant churn in the market and contractual relationships are being re-looked and re-discussed across the hospitality industry. “Generally speaking, every association between hotel brand(s) and asset owner(s) be it management contracts, franchise agreements or lease arrangements is being reconsidered or getting restructured. Seeking safer avenues hotel asset owners are demanding income/ revenue guarantees, capping of operational costs and downside protection from the hotel brand operator,” said Abhijeet Umathe, chief executive officer, Eco Hotels India Pvt Ltd.

Players in the Indian hospitality market have been bleeding financially ever since the lockdown began in March 2020. Almost negligible business and zero visibility on revenues in the near or even distant future for that matter is forcing hospitality chains and hotel asset owners to reassess their business continuity plans. While branded hospitality chains managing the hotel asset(s) have to option to move on, that’s definitely not the case with the asset owner(s) who are stuck with the property and possibly no takers for their hotels in the market.
(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)