The leisure markets and resorts are doing reasonably well with 70 per cent occupancy: Vilas Pawar
The pandemic is here to stay for a while, vaccines are out but they are not full proof and even the distribution of those vaccines is going to take a while. Choice Hotels are seeing 25-30 per cent occupancy in the corporate hotels whereas the leisure markets and resorts are doing reasonably well with 70 per cent occupancy. Vilas Pawar, CEO, Choice Hotels India is bullish that occupancies in business hotels will increase to 45-50 per cent by March-April of 2021. In an exclusive interview with BW HOTELIER, he shares more.
Where does the franchise hotel market stand in India?
The franchise hotel market is at a very nascent stage and not many people really understand the franchise business. So typically, a franchise operation runs on the basis that, there's a certain brand equity that the brand has and brings to the table along with a host of other deliverables, like sales, marketing activities, tie-ups with value, basically anything that gives the property visibility and exposure which helps in driving sales. We concentrate our time, energy, and money towards those activities. We do not manage the property on a day-to-day basis, the property is important as long as it meets all our brand standards. And, we have minimum brand standards, (For eg we have the minimum brand standard that the hotel bed mattresses needs to be10 inches. However, we will not specify that they have to be 14 inches or 15 inches.) We operate five brands here in India and every brand has its own standards.
I think in the next ten years, the entire scope of operations and owner and company managers is going to get more skewed towards a franchise business rather than a management contract with hotels, just like the way it is in the West, in Europe, in Australia and in America. America being the most mature market, of course and third-party management company will start coming into play more often. So, the owner has the option of taking the brand franchise where he sees value. Then taking a third-party management company, which specialises in managing the hotels at a much cheaper cost than what the brand would offer the management contract. It will change going forward and we are a patient company, so we sit and wait it out for that day to come. But having said that we are pretty happy, we are right now at about 34-35 hotels in India and a very healthy pipeline of about another, 16 or 17 hotels, between now and next year end.
Is there any way you can provide seamless end to end travel solutions to your loyal patrons, especially in the current scenario?
All our hotels have a travel desk and extreme care is taken with regard to our guests travelling with safety. The travel desk is dedicated to us and we have dedicated taxis in the hotel. We make the guests aware of the travel desk and encourage them to use the same. We charge a little bit more than a normal airport taxi would charge, but we do encourage our guests to take our cabs keeping in mind the sanitation and the chances of the pandemic spreading. We do tell them we use our cab service, which is what we send to the airport or the station as the case may be and then have them drop over there from our service. So, it really depends entirely on the guest and his willingness, but we do have that option available for the guests.
2020 has been the challenging year for the hospitality industry. What is your take for the same?
I think that it has been a challenging year for all industries, more so for the travel and hospitality related businesses. Of course, there are companies like the Amazon and Netflix that are booming business because, you know, it is all from home. Most industries related to the internet or the IT are doing reasonably okay. But I think the service industry got affected because the service industry is all about interacting with people and more so in hospitality. So yes, we got affected and in hindsight, nobody expected this coming and I feel we just have to get smarter and rethink and reset ourselves. Pandemic is here to stay for a while, vaccines are out but they are not full proof and even the distribution of those vaccines is going to take a while. I think the entire year has gone by and year that is to come, there will be a marginal increase in the business. We are seeing 25-30 per cent occupancy in the corporate hotels whereas the leisure markets and resorts are doing reasonably well with 70 per cent occupancy.
Typically, most hotel chains, have got a portfolio of 75 per cent business hotels, and 25 per cent leisure market or resorts and people who have only operated in a resort space are very happy because they're doing well, and I think that will continue to do so for a while for them. Business hotels are going to take a hit and that will increase as the occupancies will increase. And I am bullish that it will increase to 45-50 per cent by March, April of this year. And then it probably will pretty much stay over there for the rest of the year, maybe it will increase to 60 per cent. But I think that it really has taught us that we need to make hotels smarter. Many companies have gone smarter as they will choose to work from home or even office, but they will avoid travel even after this pandemic eradicates. Companies have realised that a lot of work could be done without travelling and it saves a huge sum of money.
We had a large office in Cyber city and now we have cut down that into less than half the space. We have divided our entire office into two teams, and we go twice a week only, one team goes once a week, one goes the other week. We don't need more than that because we are okay working from our respective homes.
We need to have checks and balances in place to make sure efficiencies do not drop, but I think that is where the concentration is going to be, to make sure that efficiency does not drop. And we continue maintaining the same productivity at various levels. So, I think this is going to be changing a lot of ways how businesses are done. At least it is not completely forgotten.
How many of your hotels are open now and when did they start opening?
All hotels are open as we speak right now. We started opening July onwards and by the end of September all were open except for two of our hotels, in Chennai. Out of which, one was a quarantine hotel. So obviously, we could not expose it for business, until fully sanitised and a certain time period had passed and the other hotel we wisely decided to renovate during these times. So, these two have opened just recently.
What are the occupancies of these hotels?
We have a hotel in Vizag which is running about 75, 80 per cent occupancy.
The average occupancy is about 25 to 30 per cent right now, but we see that climbing up, a percentage or two every week-on-week. So, like I said, I expect 45 to 50 per cent occupancies to reach by March- April of 2021 but yes, the ARRs are stressed, because if we can get a luxury hotel or a five-star hotel for INR 3000 and INR 3,500, you know, what we were selling at that price point pre COVID. So, we've had to come down to INR 2000 or INR 2,500 on that. So yes, that part is stressed, but we are managing our balance sheet and PNL in accordance with the revenues.
Can you tell us about your plans for the next year?
A good eight to ten hotels are opening next year, in all probability openings will be online. So, we are looking forward to that and they are really in a Tier-2 and Tier-3 cities. So, we are excited about that. They are smart looking hotels, primarily in the comfort and quality bracket, they are three-star, three- star plus. So, we are excited to have them on board but just keeping our fingers crossed that this pandemic does not escalate, or another mutation does not come and there's another lockdown as that affects the construction and cash flows and everything else. We have a lot of hotels opening in North India, in Punjab, also in Maharashtra, Andhra Pradesh, Tamil Nadu, Kolkata in West Bengal and then there’s one in Goa as well as Madhya Pradesh.
How do you compare the revival of the Hospitality industry in India with international markets?
I think, much slower. So, the international market is a lot faster because they did not really go into a complete lockdown like we did, also the dynamics and we have a 1.4 billion population. In America, we are still operating at about 65 per cent occupancies, they didn't have a lockdown the way we had, Europe has seen also about 50 per cent
Occupancies. Australia has seen the same occupancies,45- 50 per cent up to about 60 per cent right now. We are struggling at half of that right now in India. So, honestly India is slow on that. As it is our business was not as buoyant as the western world was. Given the pandemic and the complete lockdown that we had for two months has hurt the economic situation, the balance sheets and PNL statements of every company and that has put stress on travel and expenses.
This article was published in BW hotelier issue dated '' with cover story titled 'BOUNCING BACK - FROM SURVIVAL TO REVIVAL ISSUE VOL 6, ISSUE 6'
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