India’s Luxury Hotel Sector Needs an Oyo-Like Disruption, Says Former Oberoi Boss

All game-changing developments in India’s hotel sector thus far have been limited to the budget segment, which underwent a disruption with the birth of brands like Oyo, Treebo, and Fab Hotels, attracting the interest of big investors such as SoftBank and Goldman Sachs.

But there is a little digression. In December, the market saw the launch of a new luxury hotel brand, Postcard Hotels & Resorts, the first after a gap of about two decades. Notably, it’s by a legacy veteran, Kapil Chopra, who was the former president of Oberoi-Trident, part of EIH.

Chopra told Skift it has been a long time since a luxury hotel company got launched in India, whereas budget brands like Oyo, Treebo and Fab have mushroomed over the last few years.

“Why should all the innovation happen in the economy or the budget segment? Has the luxury hospitality sector evolved to a level where it does not require any innovation? The answer is no,” said the 45-year-old professional turned entrepreneur, who spent 19 of his 24-year career at EIH, until early 2018.

Chopra believes that sometimes customers do not know what they want. Before the entry of taxi aggregators like Ola and Uber, people would arrange their own cab well in advance, he pointed out.

Likewise, many of the norms that have defined luxury hotels over the years must be challenged or changed, he said.

“Let us not bind people with a lot of rules and regulations when they are holidaying. Why expect them to wake up at 10 a.m. for a breakfast? We will serve breakfast anytime the guest wants it,” he said.

Postcard will not have a set check-in and check-out time. Guests can enjoy 24 hours stay from the time of his check-in, and opt for a late check-out without additional costs. The entire idea behind Postcard is to make holiday stress free and experiential.

Indians Want Options

Chopra throws data to support his decision of setting up his new venture. “Indians are holidaying like never before. Indians take 5.6 trips on an average every year. They want to try new destinations but are not getting enough options,” he said.

Postcard is staying away from cities, focusing instead on destinations around mountains, seas and wildlife.

“Hotels in these destinations enjoy a premium of anywhere between 30 percent and 60 percent compared to city hotels. We do not want to be the 100th hotel in a city,” he said.

Postcard opened three hotels in the beach city of Goa the day it announced its hospitality foray. These three properties combined have just 25 rooms, priced between $210 and $390 a night. The fourth, a 30-room hotel in the hill state of Uttarakhand, will open in April.

The brand aspires to launch a new hotel every quarter and scale up to one new hotel every two months in 2020, and further to a hotel every 45 days in the 2021. Chopra aims to have 50 hotels totaling about 1,500 rooms as his first milestone.

He believes he will be able to offer greater personalized service to guests because of the limited number of rooms in each hotel. He also claims that the location of Postcard hotels will create ‘unique’ experiences for the guests.

At one of the yet to be launched hotels in Mangalore (Karnataka), Chopra said guests can be taken to the ocean to watch the sunrise early morning and can catch some fishes for their consumption at the hotel. One of Postcard’s hotels in Goa has just eight rooms spread on an area of two acres, overlooking several hundred acres of paddy fields.

Conducive Climate

Chopra joins the list of two prominent hospitality professionals turned entrepreneurs, Patu Keswani, founder of Lemon Tree Hotels, and Ashish Jakhanwala, who set up a hotel asset owning company, Samhi, of which Goldman Sachs is an investor.

“Patu and Ashish have shown that you do not need legacy capital to create a brand. They have inspired the entrepreneurial spirit in the industry,” said Chopra.

Jakhanwala told Skift that India is finally becoming conducive for professionals to turn entrepreneurs. But Chopra’s graduation as a successful and established hospitality entrepreneur may not be without challenges, he opined, as the Indian market is crowded and price sensitive, with discounts playing a key role in attracting new customers.

Rahul Pandit, a veteran hotelier who has held leadership positions at Ginger Hotels and Lemon Tree, said Postcard may face challenges in creating differentiated brand awareness that appeals to the desired lifestyle target group. “It will need to rapidly build the distribution funnel for customer acquisition and geographically grow the portfolio fast to drive repeat purchase,” he said.

Besides these, attracting and retaining unit level leadership talent, achieving target enterprise return on capital employed, and unit level margins, may require a lot of effort, he pointed out.

Chopra claims the three hotels in Goa are already delivering gross operating profits and have had a few sold-out dates.

“Real estate values in Indian cities are crazy and the average room rates are one-third of the rate in top cities in many parts of the world. Small hotels make quicker profit as they do not have expenses in form of a large banquet and multiple staff,” he said.

Postcard has ambitions to be an India-made global luxury hospitality brand. Besides India, it will focus on markets like Bhutan, Sri Lanka, and France, among others.

But there could be challenges in going global. Keswani calls Postcard a niche product that allows it to offer extra attention and care to its guests. “He knows many customers personally and making people aware of this offering may not be a challenge in the Indian market. However, in the international market, he will have to depend on specialized luxury segment operators and relevant online travel agencies and agents,” said Keswani.

High-flying entrepreneur Ritesh Agarwal, who founded Oyo, said luxury needs to be more consumer-focused in today’s world. “As a fellow hotelier I believe Kapil is onto something special and has the ability to deliver great experience and great yields together,” said Agarwal.