The Indian Hotels Company, owned by Tata Sons, recently launched a new brand, Vivanta by Taj, in the upper upscale segment.
The brand covers three new hotels in Bangalore, Goa and Maldives and 16 old properties in India and Sri Lanka. With this, the company now has put in place its brand architecture.
Thus Taj is slotted in the luxury space, Vivanta by Taj in the upper upscale segment, Gateway in upscale and Ginger in economy.
Raymond Bickson, the 55-year-old managing director and chief executive of The Indian Hotels Company, likens it to Tata Motors' portfolio: The Nano at the entry level, and then the Indigo, Safari and Jaguar or Land Rover as one moves up on the value chain.
The philosophy behind the multi-brand portfolio is actually quite straightforward. Over the years, new segments have emerged within the hotel industry and one brand doesn't fit all.
Within cities too, there are different markets. South Mumbai, for instance, could have a different appetite for hotels vis-à-vis the business district of Bandra-Kurla. What appeals to one set of customers can deter or intimidate another set of people.
The Indian Hotels Company for close to a hundred years operated all its hotels under Taj. "But the value of Taj was being diluted by properties that should be in the other segments," says Bickson. "Our brand architecture had to be changed for the future to remove confusion, give focus to our marketing and take on the challenge from global rivals."
The last point is important. India, along with China, is the final frontier for the hotel chains of the world. With just 5 million overseas travellers, everybody knows the upside is huge.
A larger market is domestic travel - the numbers here could be multiples of overseas travellers. Bickson reckons that no fewer than 47 brands have decided to enter India. Most of them have multiple brands: Starwood and Marriott have 23 each, Accor has 18.
"We need to protect our market share of 20-25 per cent," says he. "I want a larger share of the customer's wallet."
Global brands hook a customer for life by offering a brand for every price point. If The Indian Hotels Company wants to instill a similar loyalty in its customers, it has no option but to have a bouquet of brands.
The four-brand strategy begins to fall into place: A customer sticks to The Indian Hotels Company as he progresses in life. "We are now poised to run to every primary, secondary and tertiary city in the country," says The Indian Hotels Company Senior Vice-president (sales & marketing) Ajoy K Misra.
That's perhaps the reason why most hotel companies like East India Hotels, ITC, IHHR Hospitality and Bharat Hotels want to have more than one brand in their portfolio. The only one focused on the luxury segment is Hotel Leelaventures.
The Indian Hotels Company has taken the lead with four brands. But there is still a missing link. There is a fifth segment between economy and upscale called midscale - the one that exists between Ginger and Gateway.
"The midscale segment is waiting for us to enter. What kind of brand we should bring in will be clear once we have done our research on the customer for that category," says The Indian Hotels Company Vice-president (marketing) Deepa Misra Harris.
Segmented for growth
According to Bickson, The Indian Hotels Company began to think of a multi-brand portfolio almost seven years back when it signed on brand consultancy Landor Associates for the purpose. After much consumer research, first off the block was Ginger. Gateway came in 2008 and Vivanta by Taj two years later.
This brand was actually supposed to be launched in 2009 but was delayed because of the adverse sentiment that followed the financial meltdown. Bickson has an aggressive growth strategy. The company has opened one hotel every six weeks for the last seven years.
This year so far it has opened 13. As much as $3 billion (almost Rs 14,000 crore) is being spent by the company, its joint ventures and associates (which will be run by The Indian Hotels Company) on hotels across the globe. "Thirty-eight per cent of the upcoming projects in the country are ours," says Bickson. His target is 20,000 rooms by 2012, up from about 12,650 rooms across 106 hotels now.
The vehicle for growth in the days to come will be Vivanta by Taj and Gateway. At the moment, The Indian Hotels Company gets almost 65 per cent of its revenue from Taj, and 35 per cent from Vivanta by Taj and Gateway. (Ginger is a subsidiary. Because of low tariff, its contribution to the consolidated revenue of the company is very small).
In five to seven years, it will be split equally between Taj on one hand and Taj by Vivanta and Gateway on the other. Won't more non-luxury brands in the portfolio impact profitability? At the moment, Misra says Taj's contribution to profits could be higher than its 65 per cent contribution to revenue. More importantly, have Bickson and his team been able to create enough differentiationbetween the brands?
Vivanta by Taj, which could be 15-20 per cent cheaper than a Taj hotel in the same city, is targeted at a younger traveller vis-a-visTaj, and competes with the likes of Hyatt, Westin and Sheraton.
"Theaverage Vivanta by Taj customer is slightly younger, believes in no boundary between work and play and is rationally exuberant. He is the kind of person, because he is so intensely consumed by work, who understands the relevance of relaxation and therefore the little details of life. He will stop to smell the roses," says Harris.
As many as 155touch points have been identified from before the guest arrives till he leaves where Vivanta by Taj can create a differentiation. According to Harris, the chauffer to the guest will hold an electronic placard at the airport; the car to the hotel will have a massage chair, a Sony Playstation and energy drinks instead of plain water.
Thename, according to Landor Associates India Country Director Lulu Raghavan, is derived from bon vivant. "It is for people who live life to the fullest and, yet, are sophisticated," says she.
"Vivantaby Taj is wired hard to work and play. It is extremely efficient in delivering work and play environment. It has high-energy bars and very good gyms. Spas will be differently designed for a shorter treatment than luxury hotels. The customer doesn't have the time but must still experience the hotel. He doesn't want formality, he likes more relaxed service," says Harris.
This is also the message of the ad campaign for the brand devised by Rediffusion Y&R.All the formality and bespoke personalised services of Taj are thus not provided in Vivanta by Taj.
While Taj has, on an average, a staff to room ratio of 1.75, it is 1for Vivanta by Taj. Its rooms will be smaller than Taj, the public spaces will be lesser and the restaurants could be fewer.
A hotel for every budget
Gateway,on the other hand, is targeted at a younger traveller who has had his first taste of success, is wired and works round the clock. It could have one specialty restaurant and one all-day diner. Of course, in the same city, it could be 15-20 per cent cheaper than Vivanta by Taj.
Accordingto Harris, the Gateway gamble has paid off well. According to a recent survey of hotel brands in the country by Gallup, Gateway came third after Taj and Oberoi in unaided brand recall.
It was the fourth most-buzzing Tata brand in 2008, the year of its launch, and fifth in 2009.Also, by opening lower price points it was able to get customers at a time when the industry was gasping for breath. Harris admits there could have been some down-trading on the part of travellers during that period. "We had some trepidation that the person who asks to be driven to Taj may not like to ask for Gateway. But we have seen a resurgence in this segment," says she.
Ginger, of course, is a no-frillhotel for the budget traveller. It is often located near the railway station or the bus stand. It does not run a restaurant - the function is outsourced. It was management guru CK Prahalad who had advised Ratan Tata that there was a huge gap between state-run guest houses and luxury hotels.
TheIndian Hotels Company had thus come out with IndiOne. That brand eventually gave way to Ginger.
Wheredoes it leave Taj? The brand has been positioned in such a way that it can only have a high-street location. (The Indian Hotels Company, of course, runs a score of resorts and palaces under Taj.) In the new scheme of things, Taj will be the brand for the company's global foray - a magnet to get customers to its other properties.
Thecompany has identified some gateway cities that feed markets in India and elsewhere in large numbers. Taj hotels will be located there. The brand is present in New York, Boston and San Francisco in the United States and London.
Sixare coming up in West Asia and one in Phuket, Thailand. More could come in Mexico, Chicago and Los Angeles. Harris admits that the brand recall of Taj is low in the West, but claims that once a customer stays with it the probability of him choosing it again is as good as any other brand.
Eventually,says Misra, all the four brands will travel abroad. "There is a phase where some of the brands have to consolidate in the domestic market. It is not wise to step out before we come close to realising the full potential here. We are conscious that our resources need to be focused," says he.
Vivantaby Taj, of course, has a presence overseas with a hotel each in Sri Lanka and Maldives. Some time back, it was felt within the company that Ginger could be taken to other South Asian countries like Bangladesh and Sri Lanka. Bickson also knows that the brand could do well in emerging markets like Brazil. But clearly that will have to wait.