There is a growing demand for hotel rooms in India and the existing structure of the industry doesn’t fare up well with the demand. New players like Zo Rooms and Oyo Rooms are trying to disrupt the budget hotel scene by offering standardised hotel rooms with many amenities at attractive prices. This is good news for travellers and the industry. We take a look at how they will make an impact on the industry and help budget hotels get more business.
There has been a lot of activity in the budget hotel segment in India lately. Oyo Rooms has been expanding its list of hotels reaching more cities across India, the newer entrant in the segment, Zo Rooms is building up its inventory at a crazy pace and Stayzilla is strongly marketing its offerings. Many hotel chains like Ginger entered the budget hotel market with their own properties in the past but their cost per night has long crossed the budget marker.
Cost per night isn’t the only issue here. Tier II and Tier III cities hardly have any reliable accommodation options. Hotel brands with their own properties stay away from smaller cities because they don’t get enough business to justify the investment. There are many individual hoteliers trying to cater to these markets but travellers shy away from many of them because no one wants to run into surprises on their annual family trip. This is where these budget hotel chains come in.
How are they addressing the issues?
The new entrants in the segment aren’t taking the long way of setting up their own properties. Instead, they are joining hands with individual budget hotels, transforming them to meet the benchmarks they have set and then rebranding them. This way they are quickly able to expand their footprint and reach smaller cities as well. They also don’t have to bother about the maintenance of properties (except obviously ensuring that the expectations are met) so they can take care of the marketing side of the business better.
What is in it for the hotels?
Most of the individual budget hotels fail miserably when it comes to marketing themselves for obvious reasons. We went to the Oyo Rooms website to find an example. They have listed locations like Neemrana and Manesar which aren’t exactly very popular. Now suppose a small hotel in Neemrana wants to reach the potential guests, the hotelier would have to target a very wide geography with very little return. It might make sense for a 4 or 5 star property but not for a budget hotel.
After associating with a budget hotel chain, the hotel won’t have to bother much about marketing. Their new partners take care of the job for them.
How many of the budget hotels use a proper hotel management software? Sure companies like Hotelogix provide solutions at reasonable prices but still there is resistance to invest in property management software. Partnering with the hotel chains will give them access to better tools to keep track of their bookings and quick check ins. The millennial travellers are tech savvy and they don’t want to spend time on slow conventional check in processes.
How confidently would you be able to book a hotel night for INR 999 via an OTA? There are times when people come back with horror stories after stay at some budget hotels. The story can be other way round as well. Many budget hotels work really hard to ensure a pleasant stay but don’t get the foot fall they deserve. Brands like Oyo and Zo try to standardize their offerings reducing the unwanted surprises associated with some budget hotels and thus boosting the confidence of customers to book with them. Their brand name is important to them and that is why they try to provide the best support they can.
Obviously when customers have the confidence to book, the properties will see higher occupancy rates. The hotels can also bring down the costs even further as the fixed costs per room night goes down with increase in rate of occupancy. So this can help hotels bring in more revenue.
We will soon have more players in this space. Some of them are in ideation state while others are working on building up a network of hotels. We will keep you posted about their status through the news.
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