HOSPITALITY TALK with - Mr. Atul Jain - Noesis Capital Advisors
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HOSPITALITY TALK with Mr. Atul Jain Chief Operating Officer Best Western Hotels & Resorts (India, Bangladesh & Sri Lanka)
Best Western Hotels Established in 1948 with its first hotel in California, USA has expanded its footprint across the globe. The hotel chain entered India between 2015-16 and expanded its presence in India and the sub-continent. The hotel chain has a total of 13 brands under different categories to suit the requirements of all customers. Portfolio across India, Bangladesh, and Sri Lanka Existing Properties | 19 Operational Upcoming Properties | 17 Under Development 13 Franchised 08 Franchised 06 Managed 09 Managed The Indian sub-continent is headed by Mr. Atul Jain under the Sorrel Hospitality Pvt. Ltd and is headquartered in New Delhi. Mr. Atul in a quick conversation has shared his experience in the hospitality industry and the Best Western group.
Share your experience in the hospitality sector with us. When and how did your journey begin? Being a Chartered Accountant, my journey in hospitality started in 2000 as a CFO. During these years I have apart from handling finance functions, gained experience in development, operations, and Sales & marketing working with an international hotel chain in India. Since 2016, I along with all team members working towards the growth of Best Western portfolio hotel in the region, ensuring the desired level of return for all stakeholders. The journey with the Noesis team is new but very exciting. The team is very professional, has warmth, and is always eager to come up with solutions. We are glad to have them as our associates in our journey to grow the Best Western brand portfolio in the Indian market. How has been your experience with the Best Western brand in India? Best Western Hotels & Resorts has been in the hospitality industry for more than 70 years and has since emerged as the global leader in the midscale and upper-midscale segments. Currently, there are over 4,700 hotels in the portfolio across more than 100 countries and territories. Recently, the Best Western Premier brand got the recognition of being the leading upscale brand in 2019, and with the acquisition of World Hotels in 2018, the brand made its debut into the luxury segment as well. This is indicative of steadfast growth globally in terms of the number of hotels and hospitality segments. The brand has been present in India for more than two decades. However, due to various reasons, it was not able to make inroads into the Indian market & underline its presence the way it had been able to do in other markets and territories globally. Since I got associated with the brand in 2016, I and my team have put a lot of effort into marketing, and through the effective quality program of the brand, we have been able to make a deserving place in the market today. We realized that the brand has a lot of potential in the emergent midscale & upper-midscale markets in the country, and has been quite well-accepted by the hotel owners and developers. The 14 brands (not counting the brands of World Hotels) are very thoughtfully positioned to cater to the hotel typology, the distinct business needs of varying locations, and to match the vision and aspirations of the property owners. The brand’s stan dards and systems are easy to understand and follow, which adds to the value of having the brand from an owner’s perspective. We’re confident about experiencing rapid growth of the brand in the country in the coming years. What has been the growth story of your brand Best Western in India? At the outset, I would like to point out three major aspects as the basis for this discussion. Firstly, before our association until 2016, the brand was offering only the franchise model in India like anywhere else in the world. Since 2016, we’ve been offering the management model for all our brands, as we have a comprehensive hotel management experience of over two decades. Secondly, in 2015 Best Western Hotels & Resorts reimagined its brand identity to highlight its exceptional offerings and broaden the appeal with a contemporary, energetic and relevant look, which luckily coincided with our association creating an opportunity for us to reinvent the brand and sort of relaunch it in a more systematic way. Lastly, the brand had been known only by its midscale “Best Western” brand in the country. We strategically focused on developing other brands from the portfolio, particularly the upper-midscale brand “Best Western Plus”, to change the brand’s perception and its market outreach. Simultaneously, we created white spaces between the brand features, standards, and requirements to create a distinct place for every brand that helped us in presenting logical choices depending upon
the location, typology, and business needs of a particular hotel. Considering the aforementioned in conjunction with our extensive marketing efforts and focus on quality that I mentioned earlier, we’ve been able to slowly but steadily improve the brand reputation and increase its footprint substantially over the past five years. Having started with twelve properties in 2016, the number of properties has grown to twenty-eight as we speak, with more signings due in the coming months. Almost all the new hotels and 50% of the total hotels are managed hotels, which gives us a better grip on maintaining and enhancing the quality of the operations and revenues. As far as the results of the brand management strategy go, the percentage of “Best Western” branded hotels in India has reduced to 60% from 92% in 2016, while the percentage of “BW Plus” hotels has reached 28%, which is indicative of a clear shift in the brand perception. Alongside, we have also introduced “SureStay by Best Western” & “SureStay Plus by Best West ern” brands in the market that are picking up pretty well, and shall be very soon introducing the new upper-midscale boutique brand “Aiden”. Going forward, our immediate focus shall be to introduce the upscale “Best Western Premier” brand and the upper-midscale extended stay “Executive Residency” brand to include a new segment and typology respectively. What is the one unique feature of your brand Best Western that distinguishes you from the competition? If I have to choose only one, I would say that Best Western Hotels & Resorts is the only hotel chain in the world that is a membership-based model, which essentially means that the owners of the 2,800 odd member hotels in North America are the actual owners of the company. These owners nominate a board of directors from amongst themselves that in conjunction with the Executive Team, is involved in the running of the organization. As a result, the brand’s philosophy, standards, and dealings are very owner-friendly. Also, at a broader level, the brand is cost-effective as the systems fee, pass-through costs, cost of insurance, IT costs, etc. are very reasonable and the brand fees are quite competitive. What is your preferred mode of a business model for all your hotels? We prefer ‘Management Contract’ business model. In our experience, most of the owners do not have the required expertise for managing the hotel operations that most often results in a poor quality of the product, services, and also the revenues. This naturally affects the reputation of the brand directly because the guests perceive the hotel as a Best Western hotel irrespective of whether it is a franchise or a management agreement. For the owners, the management model is most beneficial as their operation and management risks are minimized & they can focus on their line of business. Let me add here that ours is a collabora tive style of management where the owner is also kept involved up to a certain extent, which keeps them assured of having a say in the management of his asset. How has the performance of independent hotels changed post tying up with you? There has been a substantial performance improvement. Let me share a few recent numbers with you based on year-on-year analysis – RNS increased by 190% from 2017-18 to 2018-19, whereas the Room Revenue increased by 125%; the contribution from the Central Reserva tion Office increased by 290% from 2017-18 to 2018-19, and by 210% from 2018-19 to 2019-20;
the contribution from the Best Western Rewards (loyalty program) was 17% in 2018, which increased to 18% and 20% in 2019 and 2020 (first quarter) respectively; almost 80% of the hotels received a TripAdvisor Excellence Award in 2019, which is the result of effective imple mentation of the Quality Assurance Program. The improvement in the operating results year -on-year is evident in our relentless support to our member hotels be it sales, marketing, or operations. Most of the branded chains have targeted Tier-I and metro cities for their expansions across India, but your strategy has been to expand across Tier-II & III cities. What made you do things differently? Being the global leader in the midscale and upper-midscale spaces, the brand enjoys a definite edge over other international brands when it comes to Tier-II & III cities. For the owners, they get to have an international brand and its services at competitive fees in the locations that are primarily studded with stand-alone hotels or domestic brands, even if the compar ison is with the domestic brands. So naturally, we would like to take advantage of that. How ever, we are waiting for the right opportunity and product in the Tier-I cities as well, which are definitely under our radar. Regarding the market trends, the policy of the governments in the past decade has been on the decentralization of focus from the Tier-I or metro cities as per their development plans, which has resulted in tremendous growth opportunities in the Tier-II & III cities. Example cases are the Smart City program and the development of the state capitals that has seen a lot of movement in these cities, which are practically nascent markets when it comes to the hospi tality sector and hence present us with high business potential. On top of it, considering that the cost of real estate and development of a hotel being comparatively lower as compared to the Tier-I cities, and the supply being on the negative side vis-à-vis the demand, it is a no-brainer. Much higher brand visibility comes as icing on the cake. What is the type of expansions you are targeting for your future developments? (greenfield/brownfield) We do not have any distinct strategy at the macro-level when it comes to whether a prop erty is a Greenfield or brownfield. But it doesn’t mean that it is not important. We assess the location and the business environment on a case-specific basis to decide on inclusion as it is understood that an operational property would get us our fees earlier than a greenfield property in that order. As I said, it depends upon the location and its future development trends, market trends, etc., and the brand that would be following these criteria. During the current pandemic, what has been your approach towards manag ing the existing stakeholders of your properties both existing and upcoming? We’ve been in regular touch with our owners since the onset of the pandemic & the lockdown, and as their hospitality partners, have been constantly apprising them about the current and future trends in the hospitality sector, and counseling them wherever required. On the opera tional side, we created the required SOPs and collaterals like posters, guidelines, etc. keeping in mind the government regulations, have been conducting webinars, training sessions, and meetings with the hotel teams, and also hosted a virtual General Manager’s conference, to keep the hotel teams motivated and to sharpen their skills in this period of lull.
Due to this pandemic, have your policies changed towards the new properties that you are evaluating? For example, during the pre-COVID era, the hotel owner had to spend a fixed capital to set up as per brand standards before the hotel started operations, but in this new normal, have you as a brand made some considerations? We believe that the current situation and the difficulties due to the pandemic are short- term in nature whereas the property is being developed to perform over a much longer time horizon. So, the question in front of us is that if concessions in quality and brand standards are given considering this short-term situation, would it affect the performance of the property and the reputation of the brand in the long term? The answer is a big yes for us. However, this situation is valid for conversion (renovation) properties and new-build properties that can open in say six months, and we do offer relief to the owner by dividing the necessary works into two or three time-bound phases so that the capital expenditure is distributed over a while. What is your view on the Indian hospitality sector in the next 12-24 months? Based on the performance of our hotels after they were allowed to open in September, we are seeing an improvement in the business performance month on month. Though the room revenues are still low as compared to the last year’s performance, the F&B business curve has gone north due to the onset of the marriage season. It is still early days to make an accurate prediction about the improvement of the business in the next 12 to 24 months, but if I have to take a stab at it, I reckon there are two current indicators to build our hopes on – first, and I’m not saying whether it is right or wrong, the central and state governments are not thinking about imposing a prolonged and stringent lockdown or stopping interstate travel despite the spike in the cases perhaps because the recovery rate is quite high; and second, there is news that the vaccine shall be available in a few months, which has led to an upward growth in the stock markets globally. However, it would take substantial time for a full recovery after the pandemic is behind us, around 2 years, for the industry to come up to the pre-COVID figures. Apart from India, which other regions are you looking for in the sub-continent for your expansion plans? Apart from India, we already have the Master Franchisee for the brand in Bangladesh & Sri Lanka, and currently, our focus is to maximize the brand’s footprint in these territories. Whether or not we would get more territories in South Asia into our fold is a matter of speculation right now, and it solely depends upon our performance & the decision of Best Western International.
About The Company Noesis Capital Advisors (www.noesis.co.in) India’s leading Hotel Transaction advisory and consulting company provides end to end hospitality solutions across India and South Asia. Founded and headed by Mr. Nandivardhan Jain back in 2010, the company has already done more than 2000 assignments in the industry with USD 250 million worth fundraised, buy/sell transactions, debt raised, etc. The company specializes in buy-sell advisory, brand & operator search, contract negotiation, consulting, feasibility, valuations, capital raising, debt restructuring, and turnaround advisory for new & existing hospitality projects. For Franchise & Management Inquiries: Mr. Piyush Valendra Mr. Karanbir Singh Nirmal +91 97691 95420 +91 95600 03663 piyush.valendra@noesis.co.in karanbir@noesis.co.in For Business Inquiries: Mr. Nandivardhan Jain Mr. Vijay Bhandari CEO, Noesis Capital Advisors COO, Noesis Capital Advisors +91 92233 68382 +91 99100 48637 nandivardhan.jain@noesis.co.in vijay.bhandari@noesis.co.in Disclaimer All the information in this report is provided solely for internal circulation and reference purposes. Noesis Capital Advisors make no statement, representation, warranty, or guarantee as to the accuracy, reliability, or timeliness of the information provided. No part of this report is to be reproduced, distributed, or transmitted in any form or by any means including photocopying, recording, or other electronic or mechanical methods without the expressed written consent of the organization.
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