MICE traffic is important for mid-segment players: Sudhir Sinha

Interview with COO, Best Western

International hospitality chain Best Western recently scored a golden jubilee in India with 50 hotels.  It has three brands in India - Best Western, Best Western Plus and Best Western Premier - and it follows a management-only model with developers. Its COO Sudhir Sinha tells Digbijay Mishra about the hotel major's plan to have over 80 per cent of its hotels in non-metro cities. Confident of touching the 100th hotel mark by 2017,  it is expecting to clock a growth of over 20 per cent in a tough economy. Edited excerpts:

After getting your 50th hotel off the mark, what is the road ahead?

We are on course with our plan to have 100 hotels by 2017. To be precise, we are operating 52 hotels right now. We have maintained our plan to focus on non-metro cities as the growth potential there is much higher and the return on investment in the long term is healthy too. This is why 80-85 per cent of our properties are in non-metro cities. The latest city that we have added to our coverage is Bhatinda.  

Why do you have such a single-minded focus on smaller cities?

One of the key reasons is the high land cost in metros. Given the current state of the economy, whenever a builder starts work on a new property, the land cost crops up as a big issue. On the other hand, land in the growing towns of India are much cheaper, at times, by 500 per cent. Plus, the states governments are keen on increasing investment in the hinterlands, so that works as a catalyst as well.

Will occupancy go up?

Occupancy is at about 60-65 per cent which is healthy in the segment I am operating in. If we are able to maintain this then it would be good. But I don't see the ARR (average room rate) going up anytime soon, though it will stabilise.

Owing to the tough economy, hotel brands have taken cost-cutting measures. What are yours?   

I do not believe in cost cutting as much as I do in efficiency. I believe the right way to address a difficult situation is look at ways via which we can increase the efficiency. Cost cutting is a negative term and I am not a fan of it.

Of the three brands you have, which brand is doing the best?

All of them are doing well because they are equipped to address different needs. While the Best Western Plus caters to the mid-segment, Best Western is a budget brand and the Best Western Premier taps a premium audience. Thus, the room tariff also varies from about Rs 3,000 to above Rs 20,000.

How important is MICE traffic for you and how much does it contribute to your revenues now?

I think no one can ignore it anymore and business developments and related events have become very important for players like us, who operate in non-metro cities, in mid-segment. As the economy grows, further this segment should see a healthy jump as well. At present, it has a pie of about 30-40 per cent and can grow over 30 per cent as the economy strengthens.

You have a management-only model. What have been your earnings per hotel?

It varies as we have different agreements with developers. So far, we are doing about Rs 8-10 crore of revenue per hotel every annum.

What have been the construction costs for the hotels that you manage?

The construction cost stands between Rs 20-30 crore depending on various factors. But, so far, that is the kind of range we have seen for our properties.