Do not impose business models on asset owners


Ever since she took over the reins as Chief Executive Officer (CEO) at Berggruen Hotels in India, Anshu Sarin has been consistently trying to give the Keys Hotels brand a new path and direction. Instead of one overarching brand, the company today has three clearly distinguishable brands and products to fit in the mid-market, budget and economy space of hospitality. P Krishna Kumar met with this highly articulate CEO to understand her plans and programmes for future.

As a hotel owner and management company, how flexible are you in building relationships to grow your brand presence in the market?

We started our journey in the India market as an asset owning company and over the years we have transformed ourselves into a company which does all three formats of business – ownership, management and franchise. Out of the 25 hotels we manage in India currently, seven of them are our own assets.

As a hospitality company, we offer a great flexibility to the hotel owners in terms of the commercial structure. We can work on variable formats like the percentage on the business we bring to the hotel. We have models which range from six months of working capital and thereafter. So, there is no stress on the asset owners.

We do understand the stress points of the owners very well, because we ourselves are asset owners. Therefore, we do not impose a model where both parties don’t see value. Eventually, if you are going to be married for a long period of time, initial six months is not going to break the camel’s back.

As CEO, which are the areas where you find need for improvement to gain brand visibility and recall?

The intention is to create a hospitality brand which is high on recognition as well as recall. We want to strengthen our marketing to make the brand high on recognition and recall so that the brand equity and salience we bring to the table is rightly communicated to the market. Another important aspect we want to focus on is distribution. Distribution is no longer selling to few corporates, travel agents or OTAs. It is expanding in different directions globally. It is about reaching out to different consumers and offering them the products at different price points. Hotels can look at the same analogy of airlines. You can create different windows and sell at different price points. Third area which required to be strengthened is technology. It is both an enabler and differentiator to the business, and not just a support function. We like to have the best in class technology in different aspects of the business. These include distribution, property management, reputation management, loyalty programme management, etc. Therefore, we have set out a plan to invest largely into branding, distribution and technology this year.

What made you think in terms of brand differentiation of products and what are your core capabilities in each space?

As a hotel company, core competencies and capabilities are with us, the question is how we leverage that and make differentiated products. We realised that there are three segments where we can add value. One is the 4-star segment. We are not a luxury player, but we are sure that we have the capabilities and competencies at the level of affordable luxury. For example, our hotel Keys Prima Hotel Parc Estique, Pune Viman Nagar; Keys Prima Shirdi, and Evershine Keys Prima Resort Mahabaleshwar operate under certain brand standards and specifications and benefit from our existing platform. They are one step above the 3-star level in terms of products, services, etc. Keys Hotel brand on the other hand is our hard core specialized product that caters to smart, value for money customers. However, we haven’t squeezed on any aspect, it continues to be a full-service hotel. Then we realised that we have the ability to go one step lower than that, which is actually a rooms and breakfast offering, branded as Keys Lite.

So these are three products which are clearly distinguishable in terms of product positioning and pricing. What happened in the market in the last few years, especially with the market slump, there was too much haze that came in between the product and the pricing. So there was no differentiator left in products and pricing in the market. And we expect that correction to come sooner than later in the market. So we have created three differentiated brands to add value on that basis.

How do you differentiate Keys Lite from an aggregator model of business?

We are a hotel aggregator, not a room aggregator. We do not want to get into the room aggregator space. Our intention is to

touch upon the alternate accommodation units like Service Apartments, guest houses, etc. These assets are generally going to the aggregators today. They are currently aggregating the rooms for these assets. But they are not able to maintain the customer experience in most of the cases. That is where we want to pitch in with our Keys Lite product. We are not saying all such properties will qualify to be part of the brand standards. But here also, we are quite clear about our business model, we don’t want to manage part inventory.

Revenue streams and operating models can be different. We can do a commission model as aggregator does with a franchise, we can do a flat fee model with franchise, or a lease model. Commercial structure can be different, but all within franchise or management model of relationship. When we speak about aggregation model, it is hotel aggregation, which would have all our brand standards so that customer experience is consistent throughout. Such asset owners can accrue benefits of our procurement platform, technology, marketing, etc.

What are your expectations in terms of growth in that space?

We are not for the number game. But, of course, we have an appetite for growth. But we don’t enter into a relationship unless we are sure we can add value to each other.

We have got about 50 hotels under the Keys Lite category. However, it is important to understand the market scenario in this category today. There is definitely an influx of asset owners today in this category. There was some assurance of minimum guarantee initially, but there has been some unfulfilled promises in the relationships down the line. There is still lack of clarity in the minds of the asset owners as how this relationship is going to settle down. Interestingly, there is a kind of unlearning that is happening now about the model in the market. So it is taking time for brands like us in explaining the model with asset owners.

What are your expectations in terms of over all growth, the operating models, etc. in coming years?

The volume will of course come from Keys Lite. But if you ask me about the value, I would say that we are capable of adding highest value as a brand is in the prime category. Our cost platforms are very efficient in that category. Our distribution mix is quite good in that space, and are highly focused and highly leveraged towards corporate and leisure business. And in terms of channels also, we have a very healthy mix of distribution channels, and great relationships.

In terms of operating format, franchise is expected to give us the scale. It’s a less risky model. The asset owner can have the control on his asset, and take time to understand the value we add to his asset. Therefore, franchise will take the pace over the management model.

But, being an asset owner ourselves, our core values come out when we manage assets.