Monday, July 26, 2004
Prahlad on IndiOne
By now, most of you have heard of the Tata group launching a new hotel chain under the brand name, IndiOne. Clearly differentiated from the upmarket Taj group, IndiOne was born out of a set of ideas promoted by C.K.Prahlad on targetting the lower end of the consumer market (and that I have posted about several times on this blog). IndiOne opened up its first hotel in Bangalore last month with about a 100 rooms. The rooms are priced at about $20 a night, features flat screen colour TV's, wi-fi access, mini-fridges, direct dial etc. In short, everything you would want from a business hotel. What's more, the average manager or executive of a mid-size firm can afford it too. IndiOne plans to open about 100-150 hotels in the next 3-4 years.
Businessworld is carrying an interview with C.K.Prahlad to coincide with the launch of the IndiOne brand. In it, he shares some of the ideas that led to the launch of the brand.
Indian Hotels had hotels that had rooms costing Rs 2,500-3,500 a night. Those were not really low-cost rooms by Indian standards. So, there was always a feeling inside the company that they have not done enough. We did a lot of research by finding out the travel budgets of managers and sales executives in medium-sized companies. The results told us that we needed to offer rooms [at] much lower [prices] than what Indian Hotels had earlier offered. We also found that budget hotels internationally costed about a fifth of the luxury hotels.
We expect to be profitable in the first year itself. Just like our pricing, our margins are also very aggressive - far more than Indian Hotels will make from its luxury project. But there is a catch. The whole idea has been devised under certain strict parameters of cost and design. The success of the project will therefore hinge on how much the management is able to run the business within these parameters. For example, there will be no concept of discounts in this model. How much the sales manager can hold in a slack season and what innovative ways he uses to sell the rooms will make the difference.
The indiOne effort can be thought of as a unique idea for not just Indian Hotels but the whole industry. This represents an important innovation from India in a traditional industry. Also, the ground-up effort by an existing management to execute a complete different model should serve as a unique learning experience in business.
Businessworld is carrying an interview with C.K.Prahlad to coincide with the launch of the IndiOne brand. In it, he shares some of the ideas that led to the launch of the brand.
Indian Hotels had hotels that had rooms costing Rs 2,500-3,500 a night. Those were not really low-cost rooms by Indian standards. So, there was always a feeling inside the company that they have not done enough. We did a lot of research by finding out the travel budgets of managers and sales executives in medium-sized companies. The results told us that we needed to offer rooms [at] much lower [prices] than what Indian Hotels had earlier offered. We also found that budget hotels internationally costed about a fifth of the luxury hotels.
We expect to be profitable in the first year itself. Just like our pricing, our margins are also very aggressive - far more than Indian Hotels will make from its luxury project. But there is a catch. The whole idea has been devised under certain strict parameters of cost and design. The success of the project will therefore hinge on how much the management is able to run the business within these parameters. For example, there will be no concept of discounts in this model. How much the sales manager can hold in a slack season and what innovative ways he uses to sell the rooms will make the difference.
The indiOne effort can be thought of as a unique idea for not just Indian Hotels but the whole industry. This represents an important innovation from India in a traditional industry. Also, the ground-up effort by an existing management to execute a complete different model should serve as a unique learning experience in business.
