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IHCL gets permission to build flagship hotel for Ginger brand.

December 20, 2019
In conformity with Tata-owned IHCL’s stated plans of expanding its Ginger hotel brand, the company has opened six new properties in Patna, Surat, Goa, Dwarka, and Kalinganagar in the past two years, in addition to getting government clearance for a “big-box” flagship hotel in Mumbai.

Puneet Chhatwal, IHCL’s managing director (MD) and chief executive officer (CEO), says the company’s new Ginger in Mumbai will start development in 2020 and have 370 rooms.

While Ginger has been in the past a budget chain catering to the bottom of the pyramid, Chhatwal says the new Ginger is focused on being aspirational. “The rooms may not have gotten bigger but the environment is more welcoming, offers more amenities, and comes with a more premium and vibrant feel, and that is in line with our overall portfolio.”

Ginger now operates 50 hotels, and is developing another 16. It employs about 2,200 people, of whom around 10 per cent were added recently. “We will take that to 100 locations in the next three years,” Chhatwal said. Tariffs range between Rs. 2,500 and Rs. 4,500, depending on the city the hotel is in.

Deepika Rao, MD and CEO of Roots Corporation, the company that runs Ginger hotels, says premium physical makeovers include getting rid of window air-conditioners, swapping 17-inch TVs for those with 42-inch screens, hooking up rooms with shower cubicles, and equipping the hotels with in-house dining and three-meal service. Key locations already feature full-service bars and new menus have a wide range of offers from Quinoa salads and chicken nuggets to chilli chicken, noodles, and biryanis. Ginger Hotels was originally conceived at catering to budget travellers, and started out by owning its properties.

Then three years ago, the company took a call to move away from that model and open new properties through an asset-light structure that is now standard across the industry and involves a management contract with an operator who pays for the land and the hotel. Ginger in recent times has gone one step further and opted to sell its existing properties to interested parties and deploy a lease-back model to unlock funds to support renovation.

The company has around Rs. 99 crore in net debt.

Who is Ginger’s current customer? Rao says B2B clients account for 45 per cent of its guests and include employees of TCS, Cognizant, Wipro, SAP, and others. Mainstream retail customers account for the rest.

So far top-performing Ginger hotels include hotels in Mumbai, Goa, and Bhubaneshwar, where the occupancy rate is 85-90 per cent and daily tariffs are at around Rs. 3,500. “We have all the pieces ready in terms of product, people, and offers, and will continue to roll out more properties in the next few years,” Rao says. “If we don’t do it, someone else will.”

She’s not wrong. The space between budget and “lean-luxe” isn’t devoid of competition. There are over 70 brands among hotels that charge Rs. 4,000 or less for a room and include Pride Hotels, Ibis, Royal Orchid, Sarovar, Hyatt Place, and Golden Tulip.

Is the Ginger model a viable one for the long term? Achin Khanna, managing partner of consultancy firm Hotelivate, says, “It’s well known that dozens of budget or mid-market hotels generate as much revenue and profit as one or two big-ticket, full-scale five-star hotels but there is also growing demand for hospitality with room tariffs that are priced reasonably. In that category demand outstrips supply.”

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