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‘Think as a consumer & emulate it in your strategies’

Recently Berggruen Holdings pumped fresh funds into its India business. Kathryn B K met Anshu Sarin, CEO, Berggruen Hotels Pvt Ltd, to know more about the investments and expansions for the new financial year.

Wednesday, June 14, 2017, 16:19 Hrs  [IST]

Q There was reports recently that Berggruen Holdings will be pumping fresh funds into its India business. How far is it going to usher your future development in India? Are you in the lookout for any buy outs of brands in the mid-market space?
Berggruen was looking at whether they should increase their investment size in India or not. In the hotel vertical, they did see that the market was changing, the company did a lot better. Almost all of our financial metrics, we were doing very well. We started growing in terms of sizes as well and therefore as we want to scale and set up ourselves to certain new target. Berggruen did feel that it is the right time to increase their investment size and which is what they did last year. So, we took the funding in tranches and that came in over last year, we are also looking at an additional funding in line possibly coming in, but that is something that we will pitch for at a subsequent point in time. Currently, the good news for us is that they have invested, they can continue to invest in the business, they have a fairly positive outlook towards the business and that is what we are looking forward to. Most of this funding is going towards how we build scales. It is going to go towards brand; distribution in terms of technology and see how else we are able to strengthen that part of it and any other asset growth that we need to serve.

Keys Hotel Ludhiana

Q How was the last financial year for Berggruen Hospitality in India?
For us, the performance was great. We recorded a double digit growth over the previous fiscal, pretty much in all metrics inclusive of ARRs. The industry had a concern on ARRs, some bit of revenue management in distribution strategies that we had deployed in FY16 actually came for us in FY17 and they fructified, therefore we did see double digit growth in most of our hotels barring may be a few exceptions. From a GOP point we did very well because, our cost platform has always been very well machined so the flow that come through the ARR directly goes into the GOP and therefore, that just makes the bottom line that much healthier so, yes we had a good year. We are looking forward to another robust year this fiscal. We would have liked it if there was a change in the market and the ARR could have gone up a lot more, but that still remains a challenge in the industry. It is still a little too far away to see a very healthy growth in ARRs, more demand and occupancy based. In the market where we are working, the supply-demand equilibrium is still not able to give a complete trust in the ARR but, we are looking forward to a good year. In 2016 we saw a 12 to 20% growth across the portfolio.

Q What kind of expectations do you have for the new financial year and what are the different business scenarios you expect to unfold in coming months?
The financial year started with its whole set of industry concerns which everybody is well aware of and some stability needs to come in. Some of our hotels have been affected. But overall, I do expect that the demand will continue to grow at the rate that it is at this point of time. The demand will continue to be robust. The ARRs will be stressed and they will remain so not just because of the supply-demand equilibrium right now not being ideal, but also because of the changing landscape and the distribution arena which started off two years ago and a lot more developments coming in today. I am not just referring to aggregation, online travel agents, and alternate distribution channels. There are whole lot of development and changes which do disrupt the ARRs that one can end up commanding. Therefore, I see that ARRs still remain to be stressed. It is a challenge for us to be able to demand as an industry, what the product actually deserves.

Evershine Keys Prima Resort, Mahabaleshwar

Q What are your strategies to strengthen sales and marketing bandwidth considering the mid-market hotel space is getting more and more competitive with the strong expansion of new brands and business models?
If you are able to think as a consumer, follow what the consumer do, what their patterns are and that’s what should emulate in your strategies and that’s the right way possibly to do the business. So, the consumer looks at the location first. That is something what we are looking at carefully, what are the locations where we want to be present, where do we think we will be able to add the maximum value. With given our core competencies, strengths and skills that are available to us. Where do we think we be first available and how do we expand there. We need to have our asset at the right place.

Expansion plans
In the next 60-90 days, two Keys Hotels will come up in the leisure destinations; one in Nainital and the other in Port Blair.
In the coming 10-18 months, six to seven assets of Keys Hotels will be opened in India.

The consumer buys because of the reach. Multiple distribution channels can get you different consumers at different price points and at different times of the journey of booking cycle and that is exactly what we are trying to do. We started looking at many other alternate ways of selling the inventory, not just from the traditional ways that the hotel is known for. Distribution and therefore the subset is the revenue management that if you are able to maximise the yield that you get from each of the distribution channels, that is our second area of focus.

We continue making investments in the FY16 17 and we are committed to making further investments into this and see how we can bring technology into an asset like scenarios such as ours in the Indian market. So, while you have a lot of multinational companies and brands which are more asset like, but the market place in which they are placed is little different. In the mid-market genre when you are trying to do management and franchise to bring together all of these assets on a single platform and be able to distribute and revenue manage them effectively, we need some amount of tweaking to the standard platforms that are available.

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