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C AS E 4 spice pert fundamentalsTM Dr Mukta Kamplikar1 grow Corporation extra develops and operates a fast-expanding chain of professionalvidence sulfurousels crossways India nether the spice smirch. There is currently a lack of competition in the soft touched p second-stringer hotels plane section and gingerroot is the only branded scrimping hotel chain in India. The gingery hotels atomic number 18 built around a conceit that provides facilities to meet the happen upon inescapably of todays change of locationer, at affordable rates. spice faces ch exclusivelyenges in different aspects of its fright as it aims to deliver consistently, fiber work to the guest and manage client expectations. COMPANY BACKGROUND break 1 The proportion of hotel surgical incisions crossways Indian cities. Jaipur Cochin Goa Pune Hyderabad Bangalore Chennai Kolkata Mumbai Delhi/National wrenching capital Region calculate Mid-market First class Lurxury R oots Corporation Limit ed (RCL) is a wholly-owned subsidiary of The Indian Hotels Company Limited (IHCL). IHCL is a parcel of the Tata Group of companies (see www. tata. om), Indias premier chore house. Taj Hotels Resorts and Palaces comprises 77 hotels, 7 palaces, 6 private islands and 12 resorts in 40 locations across India with an additional 18 international hotels in the Maldives, Mauritius, Malaysia, Australia, UK, US, Bhutan, Sri Lanka, Africa, and the Middle East. In in corporaldd on 24 declination 2003, Roots Corporation Limited operates the ? rst-of-its- chassis kin of Smart bedrock hotels across India. Launched in June 2004, the Smart Basics concept created a revolution in the world of Indian hospitality.Roots Corporation Limited develops and operates a fast-expanding chain of economy hotels across India under the peppiness brand. The caller-out either owns/ l consoles land on which it develops and operates hotels and has now started entering into joint usings where the owner brings in t he land and simple(a) shell and leases the selfsame(prenominal) to the come with. The companionships recent yield has been organic, finished underdeveloped and operating hotels in new cities or by outlet for additional hotels in existing markets thus expanding the geographic r to each one of the hotel chain.The company intends to develop and operate additional hotels under both business models to produce or achieve a dominant position in either market c e preciseplaceed by their gingerroot hotel chain. The Economy Segment Historically, hotel development projects in India generally focused on upmarket hotels that were primarily tar regulateed at international tourists and unified travelers. New hotels provide be concentrated in 18 main cities over the next 10 stratums, as shown in the pursuance chart. presentation 2 Projected hotel expansion rate over 10 years. 60 50 Number of hotels 40 30 20 10 0De lhi N Mu CR Ba mba n Hy galo i de re rab ad P Ch une en n Ja ai ipu r G Ko oa lka Vis t akh Ko a ap chi Ah atn em am da b Ud ad aip u A r Lud gra h Luc iana kn M ow Co yso imb re ato re Source HVS International. 446 shimmy consider Between 2007 and 2010, supply will growth in all categories of hotels, as shown in the chart below. Exhibit 3 Projected supply increase in all categories of hotel. Increase over Five Year maturation of Supply Mid-market First Class Proposed Supply Existing Supply Budget Luxury a? liations as opposed to gingery hotels, which ar divulge of a net call on of hotels).Going forward we see competition continuing from the nonunionized section of the market as swell up as from newer international and topical anesthetic hotel companies who wealthy person announce their intent to set-up hotels across the coun return in the esteem particle. The market is witnessing a fair amount of activity in this segment of the hotel market. Some of the companies who occupy announced plans to establish a presence in the country be sh own in Exhibit 4. Exhibit 4 lodge brands venturing into India. Brand Formule 1 Promoters Plans Agra Ahmedabad Bangalore Chennai Delhi (NCR) Goa Hyperabad Jaipur Kolkata Mumbai Other Cities ,336 519 1,906 2,075 7,030 2,252 1,442 1,298 1,354 7,402 8,056 384 462 7,794 4,407 28. 7% 89. 0% 408. 9% 212. 4% 69% 48% 55% 36% 74% 18% 57% 42 61% 36% 47% 31. 1% 28. 0% 24. 8% 12. 4% 25. 4% 11. 7% 11. 2% 30. 8% 3. 9% 32. 5% 16. 7% 38. 0% 27. 0% 43. 6% 34. 4% 36. 3% 29. 4% 28. 9% 18. 6% 37. 5% 15. 6% 37. 0% 23. 1% 38. 2% 25. 6% 21. 3% 26. 0% 49. 7% 26. 7% 24. 0% 62. 5% 51. 9% 14. 2% 10. 9% 10. 0% 18. 4% 18. 8% 26. 0% 9. 7% 13. 6% 53. 5% 10,856 154. 4% 2,632 7,408 2,770 2,465 9,318 6,870 116. 9% 513. 7% 213. 4% 182. 1% 125. 9% 85. 3%Accor in a 100 hotels in the next decade joint venture with Emaar MGF Isthitmar, Dubai New look shell hotels Easy Hotels Sleep student lodgement Source HVS International. Choice 10 hotels by 2010 ? rst hotels Hotels with to be in Tirupati and Vizag Gupta Group Air A sia, Malaysia Lemon Tree collaboratored by Warburg Pincus First hotel to be in Goa 10 hotels by 2010 While growth is anticipate in the upscale hotels, the growth in the economy segment is still minimal. While several arrange, both domestic and international, work announced plans for development of hotels in this segment, visible action on the ground is limited.Economy hotel chains in India mainly target value-conscious domestic business and leisure travelers who need convenient lodge, a consistent product and high- look services. According to a earth-closetvas conducted by gingerroot, currently, 37 percent of economy hotel guests be individual business travelers, 23 percent are contract corporate customers and 20 percent are individual leisure travelers. Economy hotel chains aim to sate customers basic accommodation needs with a? ordable determine, a comfortable lodging experience and a standardized service-product.Lack of competition in the branded economy hotels segmen t is a great opport unit of measurementy for gingery. Tune Hotels Red obscure Peppermint Royal Orchid 50 hotels by 2010 bids for 11 Hotels hotels on Railway land are held up ? rst hotel open in Hyderabad Kamat Hotels 50 hotels in the next ? ve years focused on West glide tie-up with ONGC /MRPL Wyndham with Gammon 38 hotels by 2011 Kamfotel Days Inn / top- nonch 8 Premier make a motion Inn Whitbread 80 hotels in 10 years in a joint venture with Emaar MGF Landmark 20 hotels by 2009 Group, Dubai DIC Starwood No numbers mentioned No numbers mentioned City exclusive Hotels TravelodgeCOMPETITION The lodging industry in India is highly fragmented and competitive, and competition is expected to persist and intensify. Currently, Ginger competes with three-star full-service hotels from the unorganized sector (these are hotels developed and operated as standalone hotels with no chain/hotel group Campanile While some developments have started in the mid-market segment with Lemon Tree Hote ls, Ibis (Accor), Keys (Bergruen Hotels), Day Hotels (Dawnay Day), Hometel (Sarovar Group), Hilton Garden Inn Hotels (DLF) and Taj Gateway Hotels, not much activity is visible at the economy end of the spectrum.This is possibly on account of the high prices of real estate. Ginger Smart BasicsTM 447 CASE STUDY GingerThe Service Concept The concept of Ginger was developed in association with renowned corporate out filiation thinker, Dr C. K. Prahalad, and the hotels were indigenously practiceed and developed by the Indian Hotels Company Limited. The Ginger hotels are built around a concept that provides facilities to meet the chance on needs of todays traveler, at a? ordable rates. Smart Basics is a philosophy of providing intelligent, thoughtout facilities and services at a value determine and re? cts the new spirit in which people live and work today. It signi? es the emerging lifestyle which is visible in the degree to which individuals have taken control of their various activ ities viz. the use of e-mail rather of letters, as withal the use of mobile phones, conference calls and video conferences to get things done quickly and e? ciently. Essentially, it is simplicity and convenience in ease of doing business (awareness, booking channels, payment gateways) informality, style, warmth and modernity in its plan of attack to product design, service philosophy and a? rd great power in pricing. The ? rst of the Smart Basics hotel was launched in Bangalore and was called indiOne. When the test marketing of the concept was completed, in that respect were slight changes to rectify the hotel facilities and services. After that, the Smart BasicsTM concept was rolled out across India. This stratum of hotels was launched with a new lay down, Ginger hotels, in line with the fresh, simple muchover stylish and warm world of Smart Basics. An up-and-coming category of hotels, Ginger de? nitely signi? es simplicity, convenience, informality, style, warmth, moderni ty and a? rd baron. The target segment for Ginger is the large growing middle class with increasing disposable incomes. They are the class of travelers who would spend on travel but not on luxury accommodations. These travelers look for value-for-money accommodation that is clean and secure and in any case acknowledge international travelers looking for hygienic accommodation in the smaller cities. Ginger is the only branded economy hotel chain in India with a comprehensive network of 12 hotels, with an additional 20 hotels under development as of 31 May, 2008.Their early-mover status in many a(prenominal) markets and established regional operational synergy has enabled Ginger to develop and operate hotels e? ciently and successfully in targeted markets. As the only branded economy hotel chain in India, the chain has been able to establish credibility with property owners and secure desirable properties on favorable lease call. The economy segment (3-star) is better protected against and more resilient to the volatility in the hospitality segment as compared to the upscale segment. THE OFFERINGSMART BASICSGinger hotels designed their facilities and services to look at The Square Meala multi-cuisine restaurant, on-site cyber cafe, a meeting inhabit (that seats 10 people), laundry facility (same day delivery), on-site ATM, a Gymnasium, secure parking and Doctor-on-call. Ginger lays special emphasis on environmental and ecological issues through the use of compact ? uorescent lights (CFL), well utilized indwelling lighting, auto-time charge for air-conditioning and energy-e? cient hydro-pneumatic systems. Ginger provides ingle entourage for the lone traveler twin populate with separate beds for those who travel together double rooms with a queen-size bed and special rooms for the speci? c needs of the physically take exceptiond. The rooms are packed with electronic locking systems, cable TV, Internet connectivity, a mini fridge, tea/co? ee makers, sel f controlled air-conditioners, an ergonomic work area, and a 17-inch ? at screen TV. Each room has branded toiletries, 24-hour hot and cold running water, a shower area, and bathe and hand towels. Exhibit 5 Smart BasicsTM amenities. 48 teddy Study Exhibit 6 Innovative promotion A life-size model created for a bunk that is carried to metros across India. Ginger operates predominantly in a large geographics of nonmetros with uncontested market opportunity. Exhibit 7 The Ginger Development constitute To ensure safety, Ginger is equipped with 24-hour security, closed-circuit TV to maintain records of all visitors, swipe card locks and digital safes located at a recall n Take counter at the lobby. In addition, it has supporting infrastructural facilities including administrative o? es, kitchens, housekeeping, HVAC facilities, diesel generators for emergency power supply, water treatment plant, sewerage treatment plant, etc. Ginger has outsourced food and beverage to partners opera ting on a revenue-share model, which includes Cafe Co? ee Day in selected properties. Ginger also o? ers some other facilities like SMART Wellness, which is an Ayurvedic health facility for business travelers at a low cost. This has been developed with Arya Vaidya pharmacy at all businesscum-leisure locations.Ginger has introduced SMART Sleep, which includes a posture-pedic mattress for absorbing and redistributing pressure from the remains weight, a tropical duvet and an anti-allergy pillow. The company has also introduced selfoperated vending machines that accept Indian currency for customers convenience. The company is now develop a SMART Shower. The organization believes that a customers sleep and bath are his close important needs at their hotels. Going forward, Ginger plans to develop its own range of merchandise that will be o? ered in its hotels and on its website.The merchandise is to include their bath collection, bedding collection, furnishings and decor, apparel, accessories, travel accessories and etc. Ginger intends to increase their revenue per easy room by adopting a ? exible pricing approach/policy, which will be linked to the occupancy levels in the individual hotels. EMPLOYEES AND TRAINING Ginger believes that their ability to attract good gift, train and retain employees is critical for their growth strategy, as people are critical to maintaining the quality and consistency of their services, and at that placeby their brand and reputation.The business model of Ginger uses a fair amount of outsourcing. totally about 10 managers per hotel are on the payrolls of Ginger, while all other facilities like kitchen, restaurant, backend maintenance, are outsourced. Ginger has a total of about one hundred seventy-five permanent employees. Since housekeeping and food and beverage are outsourced operations, these employees are on the vendors payrolls. Ginger tries to leverage on hotel management schools to develop a management talent pool wi th su? cient capacity to meet the demands presented by their rapid growth.The company aims to recruit, train and retain the best talent through a multi-step recruiting and tuition process, and career advancement opportunities. Ginger has implemented extensive reading programs and fortnightly tests for managerial and other hotel-based sta? primarily through information partners. New unit managers of the hotels are required to undergo a two-month training, during which they receive training in managing all core aspects of the hotel operations, as well as the company socialisation and philosophy. Ginger Smart BasicsTM 449In addition to training, Ginger has implemented periodic web-based tests to treasure the relevant knowledge and skills of their managerial and other employees. The company uses performance-linked compensation structure, careeroriented training and career advancement opportunities as key drivers to motivate its employees. Gingers repugn is also to ensure that the outsourced partner delivers up to the service standards that was agree upon. To be able to create/modify the outsourced partners systems and processes to its needs in order to deliver consistent good quality of service to the customer is critical.Since each person in the system is works towards the same goal of delighting the customer, thither are few di? erences in terms of the employee pro? les between employees of the outsourced partner and the employees on the payrolls of Ginger. It is important to ensure that the people working for the outsourced partner see themselves as a part of the same team. It is also important that the outsourced partner sees the advantages in following the policies, processes and systems of Ginger. Ginger operates in a large geography of smaller cities where the pro? es of employees in terms of their exposure to technology, comfort with modern amenities, etc. are di? erent from that of a metropolitan city. The challenge therefore lies in getting these employees to perform up to expectations. To design systems to recruit the right kind of people and provide the right kind of training to employees is a challenge for Ginger because, while the developmental inputs do not need to be the same across unit locations, the create in terms of consistent service to ful? ll customer needs has to be fairly identical. Additionally, acquiring professionally quali? d employees locally (in remote areas and non-metro cities) and retaining talent at those locations is an area of concern. In their endeavor to retain talent, Ginger makes e? orts to ensure that employees see additional value in non-monetary rewards like developing employees competencies by making this visible to their employees through certi? cations, etc. But to be able to consistently ensure this across locations remains a challenge. If there is attrition, to be able to train and retrain employees (since the numbers are very small) at remote locations becomes very di? ult. Gingers people challenges are thus attracting talent and keeping them continuously motivated, given the vast opportunities for most of their young talent. Ginger training head, Bhanot, says We are cost conscious and so we need to use unconventional methods of enlisting because conventional methods like location agencies turn out to be very expensive. We recruit through emailprotected, our enlisting portal, and about 48 percent of recruitment happens through this site. The rest of the recruitment is through referral programmes (with rewards for referring).These methods have been successful. We also build relationships with business schools and our employees go to colleges and partner with them by linking with their syllabi, calling students for get-togethers, using students as summer interns instead of release once in a year like most companies do. We try to build relationships before the recruitment even starts. We also try to get over the challenge of keeping our young sta? motivated by giving them opportunities to suss out and grow by continuously upgrading their skills.We are a reckon hotel and we have chosen e-learning initiatives to cut costs. We have in-house training, induction, training operations and e-learning modules (based on customer feedback systems) and program content is created internally. CENTRALIZED HOTEL MANAGEMENT Personnel at corporate o? ce perform strategic planning, ? nance, project development, gross revenue and marketing, training and other functions and guide, support and monitor lizard the on-site hotel operations and executives. The key elements of Gingers centralise hotel management program are Budgeting and MonitoringThe annual budget is based on historical operating performance of the hotel, think targeted marketing, planned restitutions, operational e? ciencies and local market conditions. Quality Assurance and prepareQuality standards These have been de? ned for all aspects of hotel operations, covering housekeeping and ho tel maintenance, as well as ensuring compliance with these quality standards. A set of procedural manuals have been created and employees are trained to ensure the e? ectiveness and uniformity through 450 Case Study the human resources department at our corporate o? e as well as through outsourced training vendors. The compliance with quality standards is monitored through both scheduled and unannounced visits and reviews conducted periodically at each hotel. Employees are required take periodic tests (including e-certi? cation) in order to monitor compliance with quality standards. In addition, the practice of mystery audits and tracking customer comments through guest comment cards, and the direct solicitation of guest opinions regarding speci? c items, allows Ginger to improve services and amenities at each hotel across the chain.To maintain a competitive edge and enhance their hotels appeal the company requires each hotel to allocate a ? xed percentage of their revenue for perio dic renovation and replacement of furnishings and equipment to maintain the quality and standards of its facilities. Ginger has implemented a centralized procurement system (where possible, along with the parent company, IHCL) to obtain the best pricing available for the quality of goods sourced to the hotels and to minimize the operating expenses. Ginger supports local gross revenue e? rts of each of its hotels along with corporate o? ce sales executives who develop and implement new marketing programs, and monitor and respond to speci? c market needs and preferences. Large travel agencies and smaller travel agents. constitute CenterGinger currently has a call center which can be reached through a toll-free number. Travel portals and other travel related websites. Distribution partnersPartners like BPCL, which is currently rolling out Travel Desks in various BPCL petrol pumps across the country, is also used as a channel for distribution.Access to these channels enhances occup ancy rates of the units (hotels) on a day-to-day basis. The Ginger brand, trade names, trademarks, trade secrets and other intellectual properties are used to distinguish and protect their technology platforms, services and products from those of their competitors. This also leave to their competitive advantage in the economy-hotel segment of the lodging industry in India. These intellectual properties are currently owned by the parent company, Indian Hotels Company Limited.To protect the Ginger brand and other intellectual properties, they bank on laws governing trademarks, trade secrets and copyrights as well as autocratic con? dentiality obligations on their employees, contractors and others. Ginger has registered trademarks in India, including and a registered domain name viz. www. gingerhotels. com. Gingers corporate marketing and advertising programs are designed to enhance consumer awareness and preference for the Ginger brandwhich is to o? r the best value, convenience and comfort in the economy hotel segment of the Indian lodging industry and to encourage customers use of their centralized reservation system. Marketing and advertising e? orts include outdoor advertisements, distribution of ? yers and other marketing collateral on their hotel properties, television, Internet, radio advertising, print advertising in consumer media, promotional events, special holiday promotions and joint promotional activities.In reshaping customers expectations to make the brand endearing, Ginger does not provide room service, valet and concierge, and communicates the message beguile help yourselves through its advertisements. The advertisements convey that since none of the above facilities are provided by the hotel, the customer saves on tips. However, there is clearly an expectation-perception gap as the Indian customer is still uncomfortable with the concept of Smart BasicsTM. They grapple with there was nobody to receive me, nobody gave me water in the room, I called 7 times andMARKETING GINGER Gingers core targeted customers consist of corporate customers, value-oriented individual SME business travelers and leisure travelers seeking comfortable and convenient lodging at an a? ordable price. Ginger reviews hotel pricing twice a year and typically adjust room rates annually based on the local market conditions of the city and the speci? c location of each hotel. The corporate o? ce team and the city and hotel managers jointly develop tailor-made marketing plans to drive sales for each hotel and in each city.Ginger operates in a large geography of non-metropolitan cities like Agartala, Nashik, Bhubhaneshwar and Durgapur where pro? les of customer in terms of their exposure to technology, comfort with modern amenities, etc. are di? erent. The challenge therefore lies in customer responses to these. Ginger is currently using the following distribution channels which includes online media. WebsiteInternet Booking Engine hosted on the Gin ger website is one of the main channels used for making the bookings. Ginger Smart BasicsTM 51 the room boy did not turn up. Ginger sees many customers each day who enter the hotel not knowing what to expect. The many complaints on the websites and complaints registered across the counters at the hotels have to do with services Ginger does not provide (by design) rather than dissatisfactions caused by Gingers service. Creating awareness for the Ginger brand at this point in time is a challenge, and since the business model does not allow huge expenditure on media, innovative promotion is needed.Ginger made quirky use of outdoor media by materializing the thinking of using a life-size 3-dimensional hoarding of some parts of the hotel, including getting someone to live in it. This was taken across a touch of metros for promotion and received extensive coverage in the electronic media. Ginger needs to ensure their customers come in recognizing and knowing what they should be expect ing from the hotel. The challenge is not only in communication through advertisements, but also to communicate it clearly when a customer checks in. Gingers ability to communicate clearly what the customer can expect is an area of concern.This is because there is a tendency not to explain either because the customer does not have the patience to listen or there is a fear of losing this customer. Ginger has been trying to plug this by educating the customer before he/she checks in by having commercials playing in the hotel, training front line managers to give clear messages to the customer as to what Ginger can deliver, and communication this through advertising. STUDY QUESTIONS 1. 2. 3. 4. What is Gingers service concept? engage the Flower of Service to aid you in your answer. How does Ginger create customer value?How can Ginger manage customer expectations more e? ectively? Evaluate Gingers brand positioning and communications strategy. prone that the number of players in the b udget hotels market is increasing, how can Ginger observe its unique positioning? Ginger faces challenges relating to people. How can they overcome these challenges? What are the key challenges in the way to service excellence for Ginger? Give recommendations to Ginger to overcome these challenges? 5. 6. 1 2009 Dr Mukta Kampllikar, Senior Practice Consultant, Tata Management Training Center, Pune, India. 452 Case Study