Coursework for Assessment Marketing

December 8, 2010

Bradford University School of Management Full Time MBA 2010-11

MARKETING ASSIGNMENT ON GINGER HOTELS: The Nano Taj of India

UB No: 10018396 Module Name: Marketing Module Code: MAN4045M Module Leader: Mr. Keith Hanning

I certify that this assignment is the result of my own work and does not exceed the word count noted below. Number of words 3500 (Excluding references, bibliography, graphs, tables and their titles)

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CONTENTS
TERMS OF REFERENCE: ........................................................................................................................... 3 EXECUTIVE SUMMARY: ........................................................................................................................... 3 BUSINESS MISSION: ................................................................................................................................ 3 Macro Environment: ............................................................................................................................... 4 Political:................................................................................................................................................... 4 Economic:................................................................................................................................................ 5 Social: ...................................................................................................................................................... 7 Micro Environment: ................................................................................................................................ 7 The Market:............................................................................................................................................. 7 INTERNAL MARKETING AUDIT: ............................................................................................................... 9 Operating Results:................................................................................................................................. 10 Strategic Analysis: ................................................................................................................................. 10 Market Segmentation: .......................................................................................................................... 11 Competitive Advantage ........................................................................................................................ 12 Marketing Mix Effectiveness:................................................................................................................ 13 Marketing Structures: ........................................................................................................................... 13 SWOT ANALYSIS: ................................................................................................................................... 13 MARKETING OBJECTIVES: ..................................................................................................................... 15 Strategic Thrust: .................................................................................................................................... 15 Market Penetration: ............................................................................................................................. 15 Market Development: ........................................................................................................................... 15 Service Development: ........................................................................................................................... 15 CORE STRATEGY: ................................................................................................................................... 16 MARKETING MIX DECISIONS: ................................................................................................................ 16 BUDGET: ................................................................................................................................................ 18 ORGANIZATION & IMPLEMENTATION: ................................................................................................. 18 CONTROL:.............................................................................................................................................. 18 REFLEXIVE ACCOUNT: ........................................................................................................................... 19 REFERENCES: ......................................................................................................................................... 19 BIBLIOGRAPHY ...................................................................................................................................... 20

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TERMS OF REFERENCE:
Roots Corporation Limited (RCL), a subsidiary of The Indian Hotels Company Limited (IHCL) of the Tata group is in the business of operating the first-of-its-kind category of Smart Basics hotel chain across India. These hotels have been launched with the name Ginger. Built on a unique concept, the Ginger hotels provide facilities to meet the key needs of a traveller at affordable rates. The target segment for Ginger hotels is the corporate traveller. (RCL, 2010).This paper will be formulating a marketing plan for Ginger Hotels in India and would be suggesting how the market and revenue can be improved.

EXECUTIVE SUMMARY:
The marketing report of Ginger hotels analyses the market of Ginger hotels in India. The report uses standard marketing tools to analyse the market share and recommendations are made to increase market share and revenue. Internal and External marketing audits are conducted to analyse the key issues and problems that affect the business. The evaluation of strengths, weaknesses, opportunity and threats helps in setting the strategies for future. The key recommendations for Ginger hotels are Start a 24 hour eating outlet so that the night travellers can dine and rest. Increase and develop the conference rooms to target the business travellers. Pay per use conveniences can be introduced which can generate further income. Dynamic pricing similar to the airline industry can be adopted. It will result in additional revenue during the peak season. Get endorsed by business personalities so that it becomes a one point solution for corporate travellers. Targeting tier III and IV cities.

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BUSINESS MISSION:
The Smart Basics concept, launched in 2004, signifies simplicity, informality, style, warmth, modernity and most important being the affordability. These hotels have been launched with the name Ginger Hotels- in harmony with the fresh, simple-yet-modern and warm world of Smart Basics. The business mission of RCL is to offer smart, clean and safe hospitality by adopting the next generation practices. Ginger Hotels target the middle income group looking for luxury at affordable prices. With the tag line of Please Help Yourself, the unique selling proposition of Ginger hotels is self service and pricing luxury and comfort at affordable rates.

EXTERNAL MARKETING AUDIT:

Macro Environment: Political: Atithi Devo Bhavah (Guest is God). This phrase is instilled deep into the roots of India and its people. Clearly acknowledged by the Government of India, there has been a lot of emphasis on tapping the full potential of tourism in India. (Incredible India, 2010) From the year 2002 to 2009, there was been an increase in Foreign Tourist Arrivals (FTAs) from 2.38 million to 5.11 million. (Govt. Report, 2010). The year of 2009-2010 saw a decline to 3.3 million visitors (incredible India, 2010). This fall can be attributed to the global slowdown, terrorist activities, H1N1 pandemic etc. (Govt Report, 2010) To promote the growth of new hotels, the present ministry of tourism, government of India, is offering a five year tax holiday and hotel projects are being given credits by the Reserve Bank of India on relaxed norms. The Indian government is also emphasizing on promotion of rural tourism by organising marketing fairs, issue of visa on arrival, promotion of ecotourism, safety and security of tourists etc. (Govt Report, 2010). This move of the government is a clear indication for RCL and other hotels to expand and reach out to the growing tourist population.

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Economic: An industry requires stable economic environment and continuous stimulus to grow at any given level. Close attention needs to be paid to major trends and consumer spending patterns across and within the markets. (Kotler et al, 2005). India ranks 5th with the GDP (purchasing power parity) figure of $ 3.68 trillion (2009) with the contribution of 54.6% from the service industry itself. (CIA, 2010).In the year of 20032004, the hospitality industry contributed to only 2% of GDP, now projected to grow at a rate of 8.8% from 2007 to 2016 and estimated to contribute to nearly 5.3% of GDP. (Hospitality Industry in India, 2010).This clearly marks the growth of the hotel industry in India.

The Indian hotel industry earned revenue of $3.8 billion in the year 2009 representing a compounded annual growth rate of 11% for the year 2005-09. The highlight market of 2009 for the industry was the domestic customer segment which accounted for 52.9% of the total industry revenue. (Datamonitor, 2010)

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Analysts have forecasted the Indian hotel industry to grow at the compounded annual growth rate of 13.7% for the year 2009-2014 and contribute significantly to employment generation. With the growth of foreign tourists, the domestic tourists market including business and leisure travellers is also flourishing. Technological: With the onset of the modern era, any industry can seldom prosper without technological advances. If companies fail to anticipate or fail to keep up to the technological changes, their products become outdated and hence they lose their market share. (Kotler et al, 2005). As times change, the terrains on which our businesses are built also change. What remains our priority today may change tomorrow. Todays customer is more educated, demanding and technologically aware then they were before. With the enabling of online booking of rooms in hotels, the scope to reach the customers has increased. Technology integration has helped the hotels cut costs and improve services. Recent innovations like auto check in and checkout, satellite channels, wi-fi, and online data storage of guests have helped hotels serve customers quickly and cost effectively. Social: A stable socio-political and economic environment coupled with improved infrastructure facilities improves the chances of hotels to attract more tourists, both national and international. The Indian hotel industry markets its business with the help of local festivals and cultures like Ayurvedic treatment in Kerala, the beaches in Goa and traditional fairs etc. Considering the price sensitive nature of the Indian customer, the hotels have to design their services within its price constraints. Micro Environment: The Market:

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There is a huge potential for the Indian Hotel Industry to grow in the coming years. The market is expected to grow at a compounded annual growth rate of 13.7% which was 11% from 2005-2009. The major contribution today in the Indian Hotel Industry is by the unorganised sector which stands at 70% and where as the organised sector has a share of a mere 30%.(Technopak,2010). It is estimated that by 2015, there will be a shortfall of around 100,000 rooms and the gap for budget rooms would be around 14000-17000. (The Hindu, 2010).This gives a big chance to the organised players to increase their presence and tap the market with their brand name. Customer:The customer segment for budget hotels can be put as follows.

Business Travellers

Leisure Travellers

Religious Travellers

Meetings & Conference Travellers

Visting Friends & Relatives

In the Indian domestic market, the users of budget hotels include the pilgrims visiting sacred places, film stars on shooting locations, officials on deputation, school students going on educational excursions, sportspersons, knowledge seekers etc. Every domestic user staying in a hotel has a different motive. The domestic customer generally pays less attention to value and more to price. They are quite pricing sensitive and hence look for every worth of money spent. (Docstoc, 2010). The foreign customers include educationists, sportspersons, cultural representatives, trade representatives on business promotion etc. The foreign tourists have diverse objectives and aims. They generally prefer staying in a classified hotel with standardized services. The

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recent downturn has made even the foreign travellers chose budget hotels over the big ones. (Docstoc, 2010).

Customers

Threat of new entrants

Competitive rivalry

Suppliers

Substitutes

The competitors of in the budget segment include: Lemon Tree Sarovar Hotels Fortune Hotels Ibis Choice Hotels

Barring the metros and mini metros there is little competition in the smaller towns, there has been a boom in the hotel rooms of late in bigger cities. This has resulted in numerous options for the travelling customer. With a few more hotel chains jumping the band wagon, profitable growth looks more promising in the smaller cities.

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INTERNAL MARKETING AUDIT:

Operating Results:
Roots Corporation Annual Results $m Total Sales Income Operating Expenses Profit ROC (%) 2009-10 12.95 10.64 2.31 21.71 2008-09 8.63 8.8 -0.17 % 50.57 23.18 14.58

(Source: RCL, 2010) The operating results of Roots Corporation show that the company has earned a total income of $12.95m in the year 2009-10 which was around 51% higher than the year 2008-09, however there has been an increase in operating costs by 23 % in the year 2009-10. This increased income and operating costs can be attributed to the improved occupancy and the addition of 4 new Ginger hotels in the current year. With improved market conditions and government policies, the profit of the company rose from a negative figure to $2.31m, a hike of 14.58%. Strategic Analysis: Current Marketing Objectives (RCL, 2010): The company is aiming to focus on getting permanent rooms, long stay business, groups and conferences from the corporate segment. There has been a good volume of business from online travel agents, which can be inferred as the growing internet savvy customer. RCL is planning to increase its base of online travel agents which cater to the different market. There also has been focus on obtaining business from the low cost methods like alliances, copromotions, web booking and the use of call centres. Ginger has launched a new improved website using the latest technologies and have made the bookings live.

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Market Segmentation: The Indian hotel market can be segment as follows:-

Budget

Resorts Heritage Hotels

Luxuary

INDIAN HOTEL INDUSTRY

The target segment for Ginger hotels is as follows:

Corporate Travellers

Middle income Business travellers looking for comfort at affordable price

Ginger Hotels

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Competitive Advantage: The competitive advantage of Ginger hotels is that it comes associated with the TATA group which is a name in itself. TATA group is synonymous with trust and reliability. Before the launch of Ginger hotels, the budget hotel sector was entirely unorganised and dominated by small hotel chains. Ginger effectively filled the gap of the need for a budget hotel delivering reasonable and assured services that existed in the hospitality industry. (Marketing Practice, 2007)

(Source: Ginger Hotels, 2010) Market Positioning:RCL positions Ginger hotels as budget category hotels.
Oberoi Grand Hyatt InterContinental JW Marriott Taj Mahal
Ginger Days Inn Park Inns Formula 1 Quality Inns

Luxury

Budget

First Class
Milton Radisson Hyatt regency Le Meridien Taj residency

Mid Market
Park Plaza Taj Gateway Holiday Inn Fortune Park

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Marketing Mix Effectiveness: (Ginger Hotels, 2010) Product: - The product from Ginger hotels includes smart space rooms, safe zone, smart sleep, smart planet, smart basic facilities and services like square meal, wi-fi and net zone, restaurant, gymnasium etc. (Ginger Hotels, 2010) Promotion: - Ginger hotels promotion is mainly done through the advertising media for example, Business publications to attract the business traveller, direct mail to tour operators, tourist publications to attract leisure travellers. Place: At present Ginger hotels has its presence in 24 locations in India. Ginger has marked its presence in most of the Indian tourist and business hubs. Price: - Ginger has always projected itself as a budget category hotel. The prices differ in different Indian cities based on their locations. For example, the tariff of a standard room per night in Ginger Bangalore is INR 1799 and in Ginger Bhubaneswar is INR 3099. Ginger New Delhi offers the price of INR 1300.

SWOT ANALYSIS:
STRENGTHS 1. The strong brand name of TATA 2. One of its kind, first to enter the market. 3. Sound Financial Backup 4. New Smart Concept 5. Luxury at affordable price OPPORTUNITIES 1.Improvement in Income level of Middle Income group 2.Corporates looking for Economical accommodations 3. Government Tax Holidays. THREATS 1. The rising real estate prices in India. 2. The recent rise in terrorist attacks. WEEKNESS 1. The target of only one segment. 2. No staff for service.
3. Small dine in.

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Strengths: The basic strength lies with Ginger hotels is the attachment with the TATA group which has its presence in the Indian Market before independence. The TATA group is synonymous with trust and reliability and hence Ginger becomes an easy choice for customers. They were the first corporate hotel chain to come up with budget hotels. This has helped Ginger create brand equity of its own in customers mind. They are the largest chain of budget hotels in India. The year 2008-09 saw, the profits of Ginger hotels came to a negative mark but the rich cash background provided by its mother company, the TATA group helped it to sustain and redevelop itself. Ginger differentiates itself from other budget hotels by its SMART BASICS feature. Its new and casual look places it apart from other hotels in the same category. With prices starting from INR 999.00 i.e at just $ 22.00 Ginger offers a whole range of facilities like, AC, electronic lock, comfortable beds, work area, flat TV, Gym, cybercaf etc. All these facilities are a huge attraction to the Indian middle class traveller at such prices.

Weakness: Ginger hotels has lately been targeting only the small corporate travellers and overlooking the growth of the purchasing power of the Indian middle class leisure travellers. Its concept of Please Help Yourself is sometimes unwelcomed by business travellers as there are no staffs and most of the work has to be done by the customer themselves. With customers coming in late night hours, there was no food served and hence it became a reason the customers kept away. (Businessworld, 2010)

Opportunities: The 2009-2010 GDP growth of India clearly marks the growth of the purchasing power of the Indian people with more and more people looking towards travel and business opportunities. This is a great opportunity for Ginger to invest in different business development hubs. With the Indian Government emphasising on new Airports and railway stations, Ginger can look forward to locating itself near such locations. The 5 year tax holiday up to year 2013 is an opportunity for Ginger hotels to capitalize. Untapped category B and C towns.

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Threats: The recent surge in the terrorist attacks in India and the vulnerability of prime locations to attack, has kept foreign tourists and travellers away. The rise in prices of real estate and land and also the unavailability of land has been a hindering factor in the expansion of Ginger hotels.

MARKETING OBJECTIVES:
Strategic Thrust:
EXISTING MARKET MARKET MARKETPENETRATION PENETRATION EXISTING SERVICE FOCUS CAN BE LAID ON ON OUTDOOR FOCUS CAN BE LAID OUTDOOR ADVERTISEMENTS LIKE BILL BOARDS ADVERTISEMENT LIKE BILL BOARDS SERVICE SERVICE DEVELOPMENT DEVELOPMENT NEW SERVICE DEVELOPING THE THE INHOUSE FOOD DEVELOPING INHOUSE FOOD OUTLETS ANDAND BRINGING OUTLETS BRINGIN INEXISTING EXISTING FOOD BRANDS BRANDS NEW MARKET MARKET DEVELOPMENT MARKET DEVELOPMENT REACHING OUT TO GENERAL CUSTOMERS REACHING OUT TO GENERAL CUSTOMERS APART FROM CORPORATE TRAVELLERS APART FROM CORPORATE TRAVELLERS

DIVERSIFICATION

Market Penetration: Ginger hotels can focus on more of outdoor advertisement for eg. In front of airports and railway stations and areas which have high visibility to travellers. Market Development: Ginger hotels can also look for general travellers and other leisure travellers which can give them an increased customer base. Service Development: Ginger has been losing customers who check in at night because of the non availability of food. A 24 hour eating outlet can be provided by outsourcing the service to any renowned fast food chain like cafe coffee day or barista etc. This will save cost but help in gaining customers.

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CORE STRATEGY:
Target Markets: Roots Corporation Ltd. should put focus of Ginger hotels on the middle class travellers which is a growing market in India. One more area of focus can be the leisure travellers. This can be achieved by opening hotels at more tourist spots rather than just at the business locations.

(Source: Ginger Hotels, 2010) Competitive Advantage: By catering to the middle income group market or the leisure travellers, Ginger hotels can tap the growing market which all this while was unorganised. With the name of TATA, it has the advantage over other competing hotels in the budget segment. TATA is a huge name in India and being associated with it, Ginger hotels can easily gain the faith of the Indian people. With the cash rich parent company, Ginger can foray into diverse markets and increase its market penetration.

MARKETING MIX DECISIONS:

Product:
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Start a 24 hour eating outlet so that the night travellers can dine and rest. Increase and develop the conference rooms to target the business travellers. Pay per use conveniences can be introduced which can generate further income. It can also be put as service apartments for corporate who say for long periods.

Promotions: Get endorsed by business personalities so that it becomes a one point solution for corporate travellers. Advertise near Airports and railway stations. Start package deals for leisure travellers. Tie-up with budget airlines.

Where & How to Promote: Attraction leaflets: This can be used as a medium for promoting tourism in the area by stating out the different tourist attraction which will eventually lead to growing occupancy rate. Public relations: - By keeping data of customers, seasonal greetings like festival, birthdays and discount offers can be sent to existing customers. This will create a good image of the hotel in the minds of the customers. The Ginger hotels can sponsor corporate quizzes and travel shows on television which will help it reach out the customers. Price: Seasonal discount can be incorporated in the pricing strategy which will help in increasing the occupancy rate. Corporate discount should be offered to attract more corporate customers. Dynamic pricing similar to the airline industry can be adopted. It will result in additional revenue during the peak season.

Place: In some businesses, the service provider goes to the customer and in some the customer goes to the service provider. Ginger hotels being the service provider in this case need to place themselves strategically at locations where they can be easily accessed by customers. Locations near railway stations, airports and bus stations are very customer centric and can serve as the most accessible place for customers.

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Ginger Hotels need to expand into smaller cities for top line growth and en-cash the opportunity in untapped markets. The smaller cities are currently catered by the unorganised sector and as a matter of fact have unreasonable pricing compared to the services and facilities provided. Ginger can bring in professional service and quality assurance by reaching out to the tier III and tier IV cities.
BUDGET

BUDGET:

PRODUCT PRICE STAFF AND DINEIN 30% 5% PROVIDING DISCOUNTS

PLACE PRIME LOCATIONS 45%

PROMOTION

20%

Reasoning for budget allocation: The prime locations require a lot of investment as because of the real estate price rise. Increasing staff and adding dine in requires further investment. There has to be continuous promotion across the channels to enhance the occupancy.

ORGANIZATION & IMPLEMENTATION:

Thrust will be given to customer satisfaction and a guest relations officer is proposed to be located at all the properties. Since most of the staffs are part timers, a training process is to be implemented. The marketing team will directly supervise the customer relations function.

CONTROL:
Guest feedback mechanisms to be incorporated to evaluate the customer satisfaction levels. Evaluate performance of the 24 hour restaurant concept.

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REFLEXIVE ACCOUNT:
Why Ginger Hotels? Ginger hotels are a totally new concept in the Indian hotel industry. It was very motivating to see the TATAs come into budget hotels as it was rare for the common man to experience luxury at affordable prices. Ginger came to market with a new look and strategy with their simple yet sophisticated interiors. Service marketing is one that has always posed challenges for me and hence I was enticed to take it up. Highlights:The research about the Indian Hotel Industry gave me a thorough understanding on its working and revenue models. While working on this assignment, I used several concepts of marketing like, Ansoffs matrix, SWOT analysis; PEST analysis etc. which helped me enhance my knowledge further in marketing tools and techniques. The insights in class provided by my lecturers Mr. Keith Hanning, Dr. Kyoko Fukukawa and Ms. Preece were very thoughtful. It was again a challenge to approach an Indian hotel industry with data collected from the Internet. I kept loosing focus and attention which kept me at my toes till the last moment. This was a bad experience which pushed me to be more organised henceforth. With a little more organised planning and approach, I would have completed this assignment much before time. As a marketer, I tried approaching the problem with an entire different mindset. This marketing assignment helped me understand the role of marketers better. The kind of strategies they use in evaluating a company or a product. It helped me look at the aspect from all points and reach a conclusion. In future, I will try to approach the marketing plans in a deeper level and dissect it to all possible levels which will reduce the scope for any error.

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REFERENCES:
BusinessWorld,(2010),About Ginger Hotel http://www.businessworld.in/bw/2010_05_08_Looking_Down.html [Accessed on 06.12.10] Company Report, 2010. Roots corporation ltd. http://www.tajhotels.com/AboutTaj/InvestorRelations/pdf/IHCL-SUBSIDIARY-AnnualReport-2009-10.pdf#zoom=100 [Accessed on 04.12.10] DocStoc, (2010). http://www.docstoc.com/docs/16690146/1_-HOTEL [Accessed on 07.12.10] Dissecting the Indian hospitality Industry, (2008), Technopak, http://www.technopak.com/Perspective/vol1/Dissecting%20the%20India%20Hospitality%2 0Industry.pdf [Accessed on 03.12.10] Hospitality,(2010) http://www.hospitalitynet.org/news/4045090.search?query=ten+trends+influencing+hospit ality+in+india:+how+the+game+is+changing [Accessed on 05.12.10] Hotel Industry. http://www.docstoc.com/docs/16690146/1_-HOTEL [Accessed on 05.12.10] Industry profile, (2010). Hotels and motels in India, Datamonitor. Kotler et al, (2005). Principles of Marketing 4th edition. Harlow: FT Prentice Hall Marketing Practice (2007). Ginger hotels http://marketingpractice.blogspot.com/2007_03_01_archive.html [Accessed on 03.12.10] RCL. (2010). About RCL. http://www.gingerhotels.com/AboutUs/Index.aspx [Accessed on 03.12.10] The Indian Hotels Company Ltd, (2009).Company Profile, DataMonitor

BIBLIOGRAPHY:
Jobber, D. (2010). Principles and practices of Marketing 5th Edition. Berkshire: McGraw-Hill McDonald, H.B.M. (1989). Marketing Plans How to Prepare Them: How to use them. Oxford: Butterworth-Heinemann.

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