‘Social media, consumers are today’s advertising regulators’

Josy Paul

This Q&A first appeared in DNA Money edition on  Wednesday, January 16, 2013.

Unusual is the business card of Josy Paul, chairman and chief creative officer of the Indian branch of BBDO, the global advertising major. It has neither office address nor landline telephone numbers. Even more surprising, it has his mobile number and email ID – things that VIPs usually prefer to keep private. The elegant black card even contains his Jet Privilege card number. Surprises don’t end there: the card gives away the registration number of his five-year-old Black Honda Civic. “I’m either on the road or on a flight travelling across the country. It’s practically a mobile office in my case. Hence, it made sense to have office coordinates replaced with these numbers.” In this discussion the adman speaks about Strategic design in communications, reality advertising, the digital medium, corporate campaigns. Edited excerpts...

You pioneered reality advertising in India, isn’t it?

Reality advertising as a concept was explored even before we experimented with it. It’s just that in our case the timing was very appropriate. We conceptualised an idea and designed a communication strategy around it when reality television programming was gaining momentum in the country. The Gillette ‘Women Against Lazy Stubble’ campaign for P&G not only became a huge movement in the country but also activity that created a world record in the Guinness Book and the Limca Book of Records. We have only built on what other good people have left behind.

While not taking credit for anything, it was just our response to a situation, opportunity or a problem. We feel that it has to be real and engage people in the real way that is authentic. If it happens to have some correlation with some work done before, we are more than happy. We accept that, maybe, things like this have been done before and hence would not claim to be pioneers. We have set up a philosophy for ourselves — that of creating ‘acts’ and not ‘ads’. In a way, we’ve laid down a set of principles which, maybe, the people before had not fully organised. Earlier, people were doing random ads while we’re taking a more organised approach to it.

Do you agree that advertising is closer to what the product / service stands for these days?

We’re living in a new world with a new kind of consciousness, that of a Facebook and Twitter, which is out there and driven by real people in a real world. That consciousness won’t allow the false and fakeism. Therefore, it’ll be very important that we only talk about what’s being achieved rather that what is going to be achieved. One can talk about ideas that are useful, something that is real and measurable; or you can be highly entertaining and help people be entertained for that moment. Ads could be illogical sometimes but should be highly entertaining. Having said that, nobody will be able to fake it in their communications any more because social media will kill you even before industry body takes you up. People these days are not shying away from speaking up, if they find something that’s objectionable. I’d say the consumers are the biggest industry regulators today.

Is the corporate sector getting more serious about campaigns?

I’m seeing greater consciousness among our clients for the simple reason that they also believe that’s the future. We aren’t telling them any new things. They are already in it and are trying to find a way to leverage a social context and still be sustainable at a commercial level. None of the work we do is CSR (corporate social responsibility) as companies are seeing direct benefits as well. The ecosystem is benefiting out of it and so are brands at sales and goodwill levels. It’s straddling both ways and can’t be one versus the other because then it’s not sustainable.

What kind of an impact will new media like online platforms and social networks have on television ads, in terms of reaching the target audience?

Television is still the lead medium to reach out to a larger set of people whom the corporate sector is targeting. Having said that, the way people are using television as a medium these days is changing significantly. Companies may decide to go with various available formats: that is, public relations, documentary, 30-second advertisements, etcetera. So, the corporate sector is still using the television medium, but the format is changing. Social media is playing its part by keeping the engagement alive and forcing everybody to think about interface and whether it will become a one-to-one transaction (which is a short-term thing) or a one-to-one interaction (which is a long-term thing).

How is 2013 looking for BBDO in terms of business?

We had a fantastic 2012 with interesting campaigns like the re-launch of Blackberry with ‘Action starts here’ where we made the star the hero. I think the challenge in 2013 is how to scale up these ideas and create greater impact. I think the base has been set — in the sense that this approach to appetising is here to stay for a while. Now we’ve to think about how to make it really big. The second challenge is, culturally, how do we get every one of us in the agency — we were two people earlier; now, we’re more than 100; and more will join — to understand and be with us equally and hunt for both the solution and craft and quality of solution. It’s a huge challenge and we are focusing on our reputation rather than our bottomline.

Consolidation is seeping into the Indian advertising industry. Is BBDO looking at any inorganic opportunity?

There are conversations at all times and the thing is, it’s not only about BBDO, which is part of a large organisation called Omnicom which is always looking for opportunities or possibilities to grow its objectives. I think it’s in that zone and we personally don’t get involved. We are content creators and like to remain that way.

Prozone spots new USP in luxury housing

Nikhil Chaturvedi

This Q&A first appeared in DNA Money edition on  Monday, January 14, 2013.

Having built shopping malls in Tier II cities, Prozone Capital Shopping Centres Ltd, is now looking at bringing about a shift in the way real estate is sold in these markets with its affordable luxury housing projects. Prozone, which has already invested close to Rs 1,000 crore in the realty business, is targeting Rs 300 crore in annual sales across its three ongoing developments. Nikhil Chaturvedi, managing director, Prozone, speaks about how the company is adopting novel strategies and the way ahead. Edited excerpts...

Developing retail shopping spaces being the core business, what motivated the company to make a residential development foray?

Our joint venture with Capital Shopping Centres (CSC) in this business follows a very interesting business model in the international markets they operate in. They'd generally acquire four times the land parcel required to develop a shopping mall. First they'd develop the mall thereby making the surrounding land parcel invaluable, which would then be exploited through residential, commercial and related developments. The basic idea behind this approach to create long-term, debt-free assets (malls) that are core to the business through short-term disposable assets like residential and commercial developments. We realised the business model made so much sense especially in the Indian market where cost of debt is so high, hence the foray.

So you decided to outright replicate the model in India?

A slight tweaking to the model had to be done as CSC's overseas developments were at the edge of the city while the Indian projects had to be located right in the city centre. We also decided to simultaneously develop the residential catchments when doing malls. Considering the amount of demand for housing in the market we realised it was very much doable. We also adapted a few interesting learnings from our JV partner's overseas residential developments.

And what were these learnings like?

First we went to UK to see how were they doing the residential developments and realised the approach there wasn't relevant to India. In UK they did ground plus one housing projects which was just not viable here given the scarcity and high land costs. CSC also has investments in China so we visited the sites there. We found interesting similarities to residential developments prominent one being going vertical. They'd also make a huge boundary walls, large doors and when you entered the site there was a sales and marketing office and show flats very much like what we do here in India. There was one differentiator though, a little inside the site, they had a very beautiful fully operational club house with the best of facilities and amenities. We were intrigued, the buildings were yet to be constructed so why build the club house so much in advance.

That's interesting. You mean to say the last component in a large scale residential development was the first one to be built.

Exactly. They said, every customer visits the site once in 10 weeks. If I have a thousand customers, there would be 100 customers lining up in the site every week leading to a chaotic situation. And because the competition allowed such visits they couldn't say no to the customers and every one would come back with differential levels of experience and concerns while it was still work in progress at the site. The only way to give them a powerful message was to show them an operational club house and tell the customers that site visits can be done only on a specific day of the week citing hazardous (health and safety) conditions.

What also came out of this approach is that a realistic asset was created that gave customers a realisation of the kind of environment they would be living in for the rest of their lives. The club house thus became the anchor of their development as a result sales increased 1.5 times the competition and prices started shooting north at sites they had limited inventory to offer.

It made so much sense to adapt the strategy in India. If you compare any residential development with or without visible infrastructure, the former would always register increased traction and faster price growth. And that's the approach we are taking with our residential developments in India.

But your projects are largely located in the Tier II Indian cities. Has the approach helped?

It has certainly made a paradigm shift in the way real estate is being sold in Tier II markets. There are a few challenges to this approach though. The most important being that the developer will have to be courageous enough to invest in building a state-of-the-art, fully functional club house at the start of the project, followed by the patience level for business to start kicking in. Financial soundness is very crucial for the success of this strategy.

Prozone is among the select few realty players to operate at almost negligible debt as our net debt is just Rs 10 crore. Lastly, we decided to create the visible infrastructure on the ground level as against podium level which was very time consuming. Since all this could be done with larger developments we chose to do 20 to 30 acre residential projects where 6-7 acres can easily be carved out for gardens (with 30 feet trees relocated to the site from a distance place), clubs and other leisurely facilities. A lot of care is also taken to ensure safe vehicular movements inside the development akin to what one sees with developments in Singapore. The residential developments would come up at the edge of the site which is the case with our first project in Indore Prozone Palms which is spread across 40 acres.

Selling luxury housing must be very challenging in the Tier II markets. What has been your experience?

We showcase the efforts being taken to create the luxuries through various communication initiatives including owner's manual that spell out every thing clearly thereby bring in a sense of ownership to the customers. Luxury positioning in our case is not the Italian marble and premium designer elements but the thought and attention to details being put make the product. It's about luxury tailored to the buyers lifestyle with things like sundeck and walk-in wardrobes, privacy, high railings, state-of-the-art safety and security including swipe cards for all the residents, professional facility management to name a few.

I am selling to the middle-class Indian household and make it at the rate that affordable to them. Our housing unit prices are in the Rs 2,800 to Rs 3,500 per square feet (psf) range and very much comparable to what is available in that area. The only difference in our case is that we have created economies of scale (with the number of units ranging from 1,200 to 1,500) and efficient spaces within the developments to give them a luxury feel through efficient planning and optimum utilisation of space.

Could you share some details the target audience buying into your developments. Do you also get a lot of investors wanting to make a quick buck?

Besides the middle-class households that form 70% of our customer base take the home loan approach, we have seen a lot of trader community buying into our developments. These are businessmen who prefer internal accruals and in some cases equity raised from relatives, friends and families to buy residential apartments. That is also one big reason why we stick to a 24 month delivery time as it gives these set of buyers enough time to arrange funding. There could be investors in our developments but we have devised a way to discourage them -- a two year lock-in period.

On an average how many housing units are you targeting to deliver annually?

While we have developments planned in six markets spread across 17.9 million square feet, only three i.e. Indore (40 acre), Coimbatore (26 acre) and Nagpur (41 acre) are active while developments in Aurangabad, Mysore and Jaipur is yet to start. Coimbatore and Nagpur will also have malls. All the developments will be completed in two phases at least and we are targeting at handing over 250 housing units every year. Our first mall is already operational in Aurangabad and we are currently developing commercial offices with 2 lakh square feet sold already. We have just started sales of Saral Bazaar -- kind of a flea market concept for that location -- basically shops for local people on a ownership basis as they are very averse to coming on rent but are ready to buy at premium.

Revamp to make Provogue a youth brand

This story first appeared in DNA Money edition on  Saturday, January 12, 2013.

Premium apparel maker Provogue is aggressively revamping its business. To start with, the look and feel of its 130-odd outlets will get a global appeal in the next 6-8 months.

“With times and targeted consumers changing, Provogue reached a tipping point between heritage and destiny. Thus, the ongoing revamp became inevitable,” said Timothy Eynon, business head of Provogue, a 12-year-old brand.

Focus is now on consumers in their late 20s. “We are not a teen brand nor an ‘old’ brand. Our positioning is very clear, that of a youth brand that offers innovative and stylish products for the target audience,” said Eynon.

The eagle and ‘double P’ that are part of the Provogue logo will give way to a prominently displayed ‘Provogue’ on all apparel, accessories and other product categories to be launched soon.

For instance, Provogue is set to launch new categories of apparel, men’s inner wear and premium accessories like belts and bagsfor women.

Provogue will also soft-launch an e-commerce platform next month. The company is targeting to double its store count by adding 100-odd company-owned or company-operated outlets over the next five years. With 15 franchisee outlets at present, the number is likely to swell to 300 by 2020.
For fiscal 2013, the company is targeting Rs650 crore in revenue with equal contributions expected from its domestic and export verticals.

While domestic sales have been showing higher growth, the company expects the revamp, new collections and new product categories to increase the growth rate in exports, going forward.
Eynon said 25 stores in landmark shopping malls and high streets have already been given a makeover, in terms of design, colours, lighting and amenities like trial rooms. New collections and accessories for men and women are in the pipeline.

Consequently, sales at these outlets are up 25%, driven by Provogue’s famed innovative products, technologically superior fabrics and strong colours, he said.

“The revamp will take two years (or four seasons, as they say in the fashion apparel industry) to start showing results,” he said.

Building blocks in place, Dentsu to cart in global brands

This Q&A first appeared in DNA Money edition on Wednesday, January 9, 2013.

Rohit Ohri

Rohit Ohri, executive chairman, Dentsu India Group, said 2012 was a defining period for Dentsu. He shares plans and developments at the Indian business unit, how 2012 has been for the advertising agency and so on. Edited excerpts…

How has 2012 been for Dentsu? What were the key milestones like?

The year 2012 was a clearly a defining period for Dentsu. The organisation underwent a transformation in terms of systems, technology, processes, talent, culture and so on. The company focused on building a foundation and setting a direction for the Dentsu India Group for the next three to five years. The last 12-odd months were fairly challenging as well as enormously rewarding. Many new businesses were won and many of our existing clients expressed a great deal of satisfaction with the enhanced services coupled with improved quality of work.

The year 2012 also saw Dentsu aggressively pursue inorganic approach in India and overseas. What led the decision?

The Taproot acquisition, led out of India, was certainly part of the foundation building exercise. It was a strategic acquisition wherein we wanted best-in-class creative capabilities within the group.  Taproot is regarded as one of the most creative communication agencies in India and that’s what really prompted our decision. My vision on the overall approach is that, we don’t want to be a fringe player in the Indian advertising industry. We want to be pretty much in the centre stage not necessarily defined by size. We don’t want to be the largest but the most creative integrated marketing and communications agency in India, which is what our stated objective is going forward. Unlike other players in the country, Dentsu is not an unbundled because Dentsu Media and Dentsu Digital are all part of the Dentsu India Group (DIG) with one profit and loss (P&L) statement. So to a great extent that enormously helps us in facilitating integration.

How has it worked for the agency thus far? Market believes the deal was fairly overvalued?

Not really. I don’t think the deal was overvalued. And honestly speaking, all that was quoted in the media was highly inflated. No one really knows the value as we have not talked about the deal size at all. So I am quite surprised if the market is calling it overvalued and I’d really not like to comment on such a market perception.

How challenging was the integration process? How did Dentsu deal with it?

It was not like we were setting up an agency or starting from zero because Dentsu already had an operational base in the Indian market. Integration is always challenging when there are a set of people who have already been in the organisation and one is bringing in fresh talent from the outside. To ensure that everyone (Japanese and Indian talent) worked harmoniously playing to each others’ strengths and understood how to take the new vision and culture of Dentsu forward was critical. While it certainly was a challenging task, everyone was focused around making it work and I am very happy with the end results.

Will 2013 also see some inorganic activities?

We are looking at scaling up on the digital front because that’s one of the core strengths of Dentsu Group. In the US as well as in Japan, there are state-of-the-art companies being acquired by Dentsu and we are exploring various options right now. While acquisition is one, we are keen to explore the option of bringing some of our global brands into India. The other fact is that through the Aegis acquisition we will have digital capabilities at our disposal like Isobar etc. We are evaluating all the options to identify the best way to build a compelling digital offering in India.

There were some reports about Dentsu acquiring Network18’s majority stake Webchutney.

We are exploring all our options at the moment. Yes we did meet Webchutney like we did 6-7 others in the process of exploring the possibility of acquisition. However, what the media reports have stated is baseless. Acquisition is only one of the many options and we are currently in the evaluation mode. Hopefully in the next 30-45 days we will have more clarity on what is the future course.

You earlier mentioned about bringing some of the global brands into India. Could you throw some more light on the same?

One of the things we are going to do very shortly is launching a number of Dentsu intellectual property (IP) in to India. Dentsu has an innovation centre in Japan where they work with Apple, Massachusetts Institute of Technology (MIT), Facebook etc to develop what is the next phase of consumer connect to technology. How do you create platform that consumers can use to connect with brands. Dentsu has enormous capabilities in this area and we are leveraging that strength. One of these technology platforms will be launched this month (third week of January), which will be for the first time in India. This will be the start of one of the big initiatives (with more to come) from Dentsu in the Indian advertising industry.

DTH and theatrical release of Kamal Hassan’s Vishwaroopam delayed

Actor producer Kamal Hassan's much awaited block buster film Vishwaroopam will not make it the television screens or for that matter the theatres and multiplexes on the scheduled date of its release.

A landmark development for the Indian film industry, Kamal Hassan had decided to premier his Rs 95-crore venture through DTH before its release in wide screens. The film was to be shown on the direct to home (DTH) platform on January 10, 2013 i.e. a day before its theatrical release on January 11, 2013. The DTH viewers would have had to pay Rs 1,000 for the Tamil version while it was Rs 500 for the Telugu and Hindi versions.

However, it so appears that Rajkamal films has failed to garner enough support from the multiplex / theatre fraternity that has been opposing the film’s DTH release.

Rajkamal Films’ media representative Nikhil Murugan did not respond to calls made on his cell number for an official confirmation.

The DTH players including the likes of Airtel Digitel, DishTV, Tata Sky etc. have however, already stopped taking bookings for the screening of Vishwaroopam on their respective networks.

Shashi Arora, CEO - DTH / Media, Bharti Airtel, said, “In-line with the postponement of the release date of the movie Vishwaroopam (Tamil & Telegu) / Vishwaroop (Hindi) across theaters and on the DTH platform by Rajkamal Films, we have stopped taking bookings for the movie premiere that was scheduled for January 10, 2013 at 9.30pm on Airtel DTH. The interest of our customers is paramount for us and regret the inconvenience caused to them. We are awaiting confirmation from Rajkamal Films on the revised dates.”

A Tamil-Hindi bilingual Indian spy thriller film written, directed and co-produced by Kamal Haasan that features Hassan in the lead role, Vishwaroopam also has Rahul Bose, Andrea Jeremiah and Jaideep Ahlawat in supporting roles. 

The soundtrack is composed by Shankar-Ehsaan-Loy, with lyrics by Vairamuthu and Kamal Haasan for the Tamil and Javed Akhtar for the Hindi versions respectively. The film was shot with the same cast in both languages simultaneously, and is titled in Hindi as Vishwaroop. 

It is the first Indian film, and second world film (after Red Tails) ever to be equipped with Auro 3D sound format.

According to Kamal Haasan the film is expected to earn Rs 350 crore (US$63.7 million).

For some hotels, green is the colour of bigger profit

This story first appeared in DNA Money edition on Monday, January 7, 2013.

Efficient eco-friendly practices have meant two Mumbai hotels – Meluha and Rodas, both located in Powai – save Rs1 crore and Rs29 lakh every year, respectively. Both are Ecotel-certified, a breed that’s increasing these days.

Ecotel is an environment certification administered by HVS, a hospitality-focused consulting and advisory firm. HVS claims Ecotel helps hotels enhance profits. By integrating efficient equipment and operating measures into standard business practices, Ecotel hotels enjoy reduced consumption of resources like energy and water; emissions and wastes, too, are lower.

Besides, some waste material is converted into wealth in the form of biogas. Despite initial costs, alternative energy resources like solar and windmills are encouraged. All this enhances overall performance, boosting both revenues and operations, says HVS.

Ecotel involves the entire value chain: owners, architects, operators, employees, suppliers and hotel guests. It even encompasses development of the local community. Hotels can apply for Ecotel at any stage of development, not just during construction.

Ecotel’s cost is Rs5 lakh, valid for two years. Later, hotels are re-certified (some for over ten years), provided they meet Ecotel standards and clear the property audit.

Ecotel, initially viewed as a mere marketing and branding exercise, has started gaining traction among hotel owners as the boost to profitability becomes clearer. “Fiscal benefits of operating sustainable hotels is becoming more and more known to the industry,” said Manav Thadani, chairman, HVS India.

The three upcoming Ecotel hotels will be operated under the Fern brand managed by Concept Hospitality, Asia’s largest operator of Ecotel-certified hotels.

According to Param Kannampilly, CMD of Concept, hotel asset owners are keen on Ecotel as it makes them stand out from the crowd. “Since the conversation on the environment has increased manifold, an increasing number of people want a differentiated product and want to do the right thing.”

What’s more, Ecotel norms increase the per-room cost by 10-15% at the most — something clients don’t mind paying. “A guest selects the hotel based on location and then brand. If an Ecotel hotel is in their location and if that facility and service quality are comparable, then most guests would opt to stay in an Ecotel hotel rather than a non-Ecotel hotel,” said Kannampilly. “At three years, the return on investment is much faster than non-Ecotel hotels.”

All the same, higher initial cost has kept the industry from adopting Ecotel, say experts. Vikram Vithal Kamat, executive director of Kamat Hotels, said building an Ecotel hotel is slightly expensive (10-12% higher) as there are restrictions on using certain types of building materials and refraining from using cheaper alternatives. “But while the capital outflow is on the higher side, asset owners tend to recover the cost faster because long-term maintenance cost is significantly minimised.”

Besides higher initial cost, increased construction cost, lack of knowledge on how to run an Ecotel hotel, lack of guidance on how to ace the intense scrutiny that precedes Ecotel certification are other reasons why hotel asset owners shied away from adopting Ecotel, industry observers said.

Media needs to be more than just a mirror of the society: Prasoon Joshi

An edited version of this story first appeared in DNA main edition on Monday, December 31, 2012.

Media is not only the mirror of the society, it also shapes the society. "While mirroring part is taken very seriously," feels Prasoon Joshi, president, McCann Worldgroup South Asia, "shaping is not and that's what I end up arguing with most media professionals including a few who are good friends."

Media, including the film and advertising fraternity, is often accused of commodifying women. There have been several instances of objectionable advertisements, portrayal of women in bad taste by a section of the fraternity. However, industry players feel putting everyone in the same basket is incorrect.

According to Joshi, such people exist in both the advertising and film fraternity. "You find all kinds of films, people and portrayals. Some people actually are very careful about it and would not try and objectify a women or unduly disrespect or degenerate her image. But at the same time there would be others who don't care and bother. As a result you see advertisements and films with objectionable content," said Joshi adding, it is for this reason there are various bodies to regulate such a mindset.

Media has been regarded as reflection of the society and mirror's what it sees across cultures in its communication and messages. While media has to be responsible and understand their limitations, it cannot hide facts. That said, Media also needs to follow certain rules, have a line of control, but some entities do go overboard in an attempt to play the TRP game.

"One tends to see a few instances of women being commoditised on television channels for high TRPs," said Raj Kamble, managing director, Strawberryfrog. "But the audience these days are smart enough and hence do not take them seriously. I can confidently say that a large section of media these days does a lot of sensible things and that's very commendable."

While there is no denying on media being the reflection of the society, is it really doing enough to bring in that much required a change? With atrocities happening time and again, is there a need for introspection in their approach to projecting women in a manner that instills a sense of confidence in addition to providing a safe and secure way of life for women in the country.

"Introspection is necessary anytime some atrocities happen. It should not be restricted only to the advertising and film fraternity but every other place, fraternity, discipline where there are women. They are all part of a society and media can not be singled out as the reason why this is happening or has happened," said Joshi.

Indian psyche, experts feel, is among the various reasons responsible for problems to occur. Nothing happens suddenly as it could be part of a larger consciousness of this country. "It's not as if the film makers in this era are responsible. To be fair, advertisements or films in the past have showcased women in a different light. You can go back and find things that are objectionable throughout," said a media professional.

What is it that can bring change then? The whole consciousness of the society needs to reject something which is objectionable, feels the media fraternity.

"One must understand that advertising or film is also a product. People should get conscious if there is something not acceptable and stop buying than looking upon it. No matter how much people consume pornography, people don't consume and accept it openly. If there is something that's objectionable to women, it should not be the decision of a few people of the society. A larger consciousness of the nation has to reject it," said Joshi.

He added, "When we talk about "dowry" or something like "sati", which is a thing of the past now, those are also part of our tradition and we have realised those are things we have to do away with. Larger consciousness of the society has rejected it and that is the approach really required today."

A section of the fraternity feels that advertising and films are about creating images and it would not be fair to single them out or hold responsible. "Media is a very easy target but there are many hidden layers in the society that are shaping this concept," said a media professional.

"If there is a fashion product and someone is walking the ramp, wearing a certain kind of dress and is very confident about herself, that is what needs to be looked at. Ye thodi ki, bori mein lapet ke aurat ko bitha dein... We have to respect her individuality, dreams and freedom of expression. If she wants to go out on her own she should be able to do that," he added.

Commenting on safety measures for girls/ women in various Indian cities, the fraternity is convinced that one cannot imagine a girl / women anywhere in the country saying that she wanted to watch a movie, bought the ticket and sat in the theatre all by herself. "Very rarely one would find a young girl alone in such public places. I hate people who say why did you go alone. What the hell? What are we talking about, what society are we talking about," said a top media professional with a leading advertising agency in Mumbai.

Secondly, in case of rape we have to remove one very important perception - that the women has been shamed. Why should she be shamed? It is the man who should be shamed. In fact the society should ostracise the rapist. Instead the rapist are celebrating and sitting in various powerful positions in the country. How can we let that happen? Everytime something like this happens, the victim has to go hide her face somewhere and the people who have done it are proudly roaming around in the society. Why such double standards?

"I consider today is a very positive phase because people like you and me are openly talking about it. It's a fact that people have never ever looked at rape so seriously in the past. That fact that people including media are asking questions, there is a sensitivity towards it, there is questioning attitude towards it. The fact that we are ready to introspect. I think it's a very positive sign," said Joshi.

Hyatt wants most preferred hotel tag across segments

This Q&A first appeared in DNA Money edition on Wednesday, Dec 26, 2012.

Ratnesh Verma

Ratnesh Verma, senior vice-president, real estate and development, Hyatt Hotels (Asia Pacific), is sure that the recently concluded unique management contract deal with IHHR Hospitality will be loaded with positives. He outlines what the growth engine looks like in India and much more. Edited excerpts:

What’s your growth strategy? How many hotels are you launching over the next two quarters?

Our growth strategy is not about planting in flags. We are not the largest hotel company and we don’t want to be one. Our objective is to be the most preferred hotel company across the segments we serve. Over the next six months, we are looking at opening some exciting hotels starting with Hyatt Regency hotels in Gurgaon and Ludhiana, Hyatt Place hotels in Hampi (opened last week) Pune, Bangalore, Andaz Gurgaon and Grand Hyatt Kochi.

You recently signed a deal with IHHR for introduction of Hyatt brand in India.

In fact, much before the IHHR deal, we’d already signed a Hyatt branded hotel in Raipur. This project is likely to get operational in another six months. The 110-room hotel is being developed by the Saraf’s – owners of Grand Hyatt Hotel and Residences at Vakola, Mumbai.

Is the IHHR deal uncommon in the Indian hospitality market?

It’s not entirely uncommon. In many situations, you do have owner-managed assets that are then managed by third-party specialist hotel companies. At some point in time, businesses reach a stage when they have to choose one option over the other. Promoters ask themselves if they want to be a hotel developer, owner or a hotel manager. Beyond a certain stage, from a scale point of view, the management requires a lot more investment of resources, time and commitment.

IHHR wants to continue being a hotel developer and focus on building assets.
So, the promoters have already identified their priorities. They also see a good fit with a company like Hyatt that will give their assets access to global distribution, marketing and brand equity in the country. Hopefully, we will be able to deliver a performance that would meet their expectations.

We are currently working with IHHR to go through some of the key changes that would then lead to branding of the hotels which we feel would be sometime between February and March 2013.

What changes are you likely to make to the Ista hotels’ portfolio?

I think the key changes are more from the operational point of view like plugging into the Hyatt point of sale (PoS) from a technology point of view. The collaterals will undergo changes as well. Most importantly, we are trying to incorporate changes that are customer touch related points because it is not just putting a name on the building but also delivering what the customer would expect from a Hyatt hotel. The Ista hotels will not undergo any structural change at all.

There are talks that the deal was done primarily to give Morgan Stanley (investor in IHHR) an exit?
 
I don’t think so. I have been dealing with key executives at IHHR, investors and the management team for over a year now. I can’t comment specifically on a market rumour, but what I can say is that they have been very unified and collective in driving this process.

Market sources also said Hyatt has invested $25 million for this deal.

Not at all. Hyatt is managing the hotels and we have no equity stake whatsoever in this transaction.

So, is Morgan Stanley still invested or does the London-based Bhanu Choudhrie’s C&C Alpha Group own a majority of IHHR Hospitality?
 
I am not sure if Morgan Stanley is still invested. There was some media report saying they have divested shareholding, but you’ll have to confirm it with them. The ownership structure is fairly spread with Choudhrie family as major shareholders.

Do future developments from IHHR automatically come to Hyatt with the signing of this agreement?

Our relationship with them is specific to the current portfolio of five hotels. As and when they build additional assets, we hope to be part of that development, but there is no understanding/guarantees from either side. Both Hyatt and IHHR will have to look at it on a case by case basis.

Travel companies rake it in as busy season comes good

This story first appeared in DNA Money edition on Sunday, December 23, 2012.

Nothing, it appears, can spoil the Indian traveller's holiday right now – not high airfares, nor a weak local currency. Travel and tourism companies are witnessing significant traction (both offline and online) for booking flight tickets, hotels, holiday packages and other allied services.

So much so, between October and December, the business may have grown a quarter over the corresponding period last year. "These are the peak travel months and business has been good both for domestic and outbound travel. The industry has grown by over 25% and packaged holidays have grown around 23%,\" said Arup Sen, director - special projects, Cox & Kings.

Within the overall business, the domestic holiday segment grew significantly higher than international. This, despite the airfare for domestic destinations witnessing substantial increase due to reduction in the number of flights.

Pratik Mazumder, head - marketing, Yatra.com, said travel portals have seen tremendous growth in the holiday business. "Over last year, our domestic business has seen more than 250% growth and the international outbound business more than 150% growth.”

As for international holidays, industry players said the depreciating rupee made foreign destinations more expensive for travellers this year. Movement in currency exchange rate affects the cost of holiday on the whole as hotel, accommodation, air tickets and visa charges fluctuate depending on the prevailing exchange rate.

"However," said Vishal Suri, deputy COO - tour operating, Kuoni India, "This led Indian travellers to identify alternative holiday options within their budget. A substantial number of travellers reduced the duration of their holidays and opted for shorter vacations. Budget travellers explored domestic holiday destinations. Weekend packages for destinations at drivable distances gained popularity."

Stimulating the demand for leisure travel, airlines had launched a 30-plus days Apex fares, offering 50% of their inventory at discounted rates. The strategy played well for the airlines, ensuring that over 40% of their seating capacity was booked well over 30 days in advance.

Noel Swain, executive vice president - supplier relations, Cleartrip, said, "The average pricing this year is 20-25% higher than what it was last year. The Apex fares bring the differential down to just about 10%. This gave customers a pricing advantage of 10-15% on airfares, which is a considerable benefit in terms of pricing for planning holidays in advance," said Swain.

"This year, people were smarter. They planned in advance and started booking early, since October, which is why we were sold out by early December. Besides, contrary to market perceptions that people would be cutting back on their travel spends, spends have increased considering average package costs are 10% higher than last year due to airport duties, taxes and higher hotel costs. Our standalone hotels business, where people are taking 'drivable distance' holidays, has also seen a nearly 100% growth," said Mazumder.

Industry players also indicated that average bookings (domestic air tickets) tend to decline marginally in December as most people are travelling between December 20 and January 5. However, the numbers are up marginally compared with November.

"Overall, there is a 4-5% increase in bookings compared with November and at Cleartrip, we have seen 13-15% increase over last year. On the hotel bookings front, the month-on-moth growth is about 35%. The numbers essentially mean there are a lot many people travelling in December this year compared with last year. This is a clear indication that December is going to be much better for the hotels and airline industries with very robust bookings through the Christmas week going past the new year," said Swain.

On the international front, Cleartrip has witnessed a 75% growth over last year. This is mainly because of increased capacity from low-cost carriers (Indigo, Spicejet) that launched multiple international destinations from India to the Middle East, SAARC and South East Asia, etc.

The focus is on free individual travellers, or FITs, who make up more than 65% of all international travel. "The FIT customers are the slightly evolved set of travellers who pretty much know what they want to do when in a particular destination and hence plan their own route and activities," said Suri.

DLF to sell Amanresorts in $300 m deal

This story first appeared in DNA Money edition on Thursday, December 20, 2012.

DLF, India’s largest realtor, has managed to sell its Amanresorts luxury hotel chain after scouting for a buyer for a long time. Five years after it bought the chain, DLF is selling Amanresorts back to its Indonesian founder Adrian Zecha for $300 million, or Rs 1,600 crore. The sale excludes Amanresorts’ flagship Lodhi Hotel in Delhi, which will be retained by the developer.

Under the deal, Zecha will acquire DLF’s 100% stake in Silverlink Resorts Ltd, the holding company for Amanresorts. However, it is unclear whether Zecha will partner with any investor for the transaction.

Sriram Khattar, senior executive director, DLF, said that Goldman Sachs and Citi Bank were appointed six months ago to find buyers. “Many were approached and I am happy that the portfolio is going back to the company’s founder,” he said. The deal is slated to be closed by February and a significant part of the proceeds would be used to cut debt.

DLF had acquired a 97% stake in Amanresorts, which had about 25 properties across the world, in November 2007 for $400 million or Rs 1,580 crore at the then exchange rate of Rs 39.80 for $1. The stake was raised to 100% later.
While the company was said to looking to sell the chain for over $350 million, experts said $300 million was a decent valuation.

“One needs to also consider that Lodhi Hotel is not part of the sale besides exchange rate in 2007 was much lower. The deal is to conclude next year in February so we’ll have to consider the exchange rate at that point in time,” said a top hospitality consultant.

Another industry source said, “While the present book value of Lodhi Hotel could be over $80 million, its market value is 2-3 times the book value. So if you add that to the $300 million valuation I think DLF has a very good deal.”

Analysts said the Amanresorts deal was is line with the company’s divestment guidance for the current fiscal. “The transaction is significantly positive for the stock. We value DLF’s hotel assets (including the New Delhi property) at Rs 1,970 crore, said Aashiesh Agarwaal, analyst with Edelweiss Research, in a note on the company.

The deal is also in line with the DLF’s target to bring down debt to Rs 18,500 crore this fiscal from Rs 21,200 crore. “We’d given guidance that strategic non-core asset divestments will bring Rs 5,000 crore, which will be achieved by the end of this year,” said Khattar.

With this deal, the company has sold Rs 4,750 crore of assets this fiscal.
“Further divestment in wind power business, which is in advance stages of negotiations, is expected to generate another Rs 900 crore,” said Agarwaal of Edelweiss.