Futurist Alvin Toffler’s book Third Wave perfectly visualised the way the service industry would transform, as society moved forward from the industrial revolution. A hotel room at the click of a mouse, he predicted. You have it now. Just tap your finger. When Ravikiran and his friend had to scrounge up two rooms for an emergency in Bengaluru early this year, it was done in minutes from his smart phone, at a very reasonable rate.
The Indian hospitality sector is undergoing a revival, with demand rising rapidly for the branded affordable hospitality segment. Smart phone users in India are expected to hit 204.1 million by year end, most of whom will book hotels online. This number is expected to grow from 3.5 million in 2014 to 8.4 million by 2016, according to Google India.
The low cost that hotels offer for online booking is already driving this growth.
OYO Rooms, for example, has offerings at just Rs 999 per night. Its range of hotel rooms span the spectrum, up to Rs 8,000. And all of their 80,000 plus inventory (including hotels, home stays and guest-houses) is online.
“The Indian consumer wants the option to purchase online, on-demand availability and predictability. We offer it,” said Kavikrut, Chief Growth Officer, OYO Rooms.
Over 10,000 new rooms are expected to be added online in the branded budget hotel segment in 2016 and it could double, say experts.
IBIS of The InterGlobe Hotels (IGH) group, with over 11 operational hotels and 2,000 rooms, plans to add nine hotels and 1,500 rooms in the coming years. “We are investing another Rs 2,000 crore to meet rising demand,” said Shwetank Singh, Vice-President, Development and Asset Management, InterGlobe Hotels.
Lemon Tree Hotels, another player in the space, is building nine more hotels, adding another 1,400 rooms, to be operational by 2018. The chain currently runs 24 hotels with 3,000 plus rooms.
Joining the race are luxury chains like The Park. Their new offering, ‘Zone by The Park’, is marketed as a ‘price and design conscious’ brand. With three hotels now and five more to be operational by year end, is also eyeing properties in Goa, Puducherry, Chennai and Igatpuri. “This segment is growing and we want to bring our ethos to customers,” says Santhosh Kutty, General Manager, Operations & Development, Zone by The Park.
What Consumer Gains
Apart from affordability, the consumer is now spoiled for choice with a range of options, provided through rampant cross-branding and bundling of services, that were well beyond their reach earlier.
Driven by the digital push, several disparate partners are packaging services, from travel agencies to tourism firms and hotels, at combined rates much cheaper than earlier.
“Bundling is one of the few ways that you can differentiate in a highly undifferentiated sector. It is here to stay,” admitted Singh.
IBIS Hotels has partnerships with airlines like IndiGo, credit card firms and online travel portal MakeMyTrip.com. It is by no means the only one. “However, we have not been seeing too much traction from the hospitality side,” said Himanshu Periwal, vice-president, Ixigo, a travel and tourism planning portal. With less than 20% of the hotel inventory online, he feels there is immense potential still to be exploited.
The Final Driver
The branded budget hotel segment might be the driving force behind the explosion, but it is digital platforms driving their growth. The Google Travel Trends Report indicates that while queries for the hospitality sector grew at 37%, the branded budget segment’s grew by at a whopping 179% y-o-y.“Newer players in the segment have energised the travel vertical,” said Vikas Agnihotri, Director Sales, Google India.
Traditional players too want a pie of this pie. “This is the future, if they build a strong digital platform and have inventory available on demand,” said Krut.
IBIS wants its 100% inventory to be online too. “Some areas already get almost 40 - 50% of bookings online,” he said.
For customers, the digital revolution, the proliferation of affordable inventory and the rampant bundling of products means quality hotel accommodation is now easier to get and at lower costs than ever before.