Budget and mid-market hotel chains in the country are busy tweaking their growth strategies in the face of rising threat from budget accommodation aggregators.
At a time when a new breed of young entrepreneurs are setting up cheaper, better and more attractive hotels - offering accommodation in great locations at cheaper prices with complimentary breakfast and WiFi service thrown in - these hotel aggregators are steadily eating into the conventional budget and mid-market chain’s business.
"While these aggregators are currently operating in the fragmented part of the market, they are now trying to move into the organized market and if they do that, it will certainly have an impact in terms of competitive offerings in the market because their strategy is to clearly burn and build a market traction, " said Patu Keswani, chairman and managing director, Lemon Tree Hotels.
"Effectively, they will bring more supply from the disorganized to the organized part of the market and therefore competitively target the same customer that the organized economy and midscale chains have been targeting."
Oyo Rooms, Zo Rooms, Wudstay and FabHotels are among the dozen-odd budget aggregators which have forced the hotels to rethink their growth models.
"The start-ups are definitely shifting the consumer mindset as they trying to solve the problem of connectivity and access. They are quick when it’s comes to reaching out to consumers and responding to their complaints, " said a senior executive at a budget hotel chain, who did not wish to be identified, adding that traditional hotels are cognizant of this fact and trying to realign their growth story.
For instance, mid-market chain Keys Hotels - funded by New York-headquartered Berggruen Holdings - has already entered the aggregation space with a new brand’Keys Lite’. "Keys decided to move to the aggregator model recently but their model is not underwriting but more of a franchise and revenue sharing, " said a person aware of the development. The hotel chains website currently lists three properties under the Keys Lite brand.
"We at Keys are continuing on evolving our product offerings keeping in mind emerging trends, " said Anshu Sarin, CEO Keys Hotels, without responding to specific queries on the Keys Lite brand.
Keswani of Lemon Tree Hotels said the company may look at creating sub-brands and lend it to larger hotels and guesthouses in the organized sector. "We are scanning the market and are evaluating the model. We would look at larger guesthouses and standalone hotels which are legal as it is not viable for us to manage 10-15 rooms."
A senior executive at another mid-market chain, on condition of anonymity, said that the hotel company may look to tie up with existing budget accommodation aggregators’ to sell some of their unsold inventory, but under their own brand. "We now have one more channel to sell the rooms but we are not planning to undersell our rooms."