By Rahul Rai
WE ARE primarily insurance brokers for the past 25 years. We started in 1996 at that time my father brought in the concept of group insurance in India. In 1999 when FDI was opened, we were required to do 51 pc of our own business to justify 49 per cent of broking which we were doing. We had to come up with a product that was not insurance and that was our product which we were selling in the same markets.
Because we were in the rural and semi rural sectors, we tried to find a business which would suit our existing customers. We became a tour operator selling long stay package plans over four years, seven years and ten years. -We had reverse integrated by then. I used to buy unsold occupancy from 30 hotels in India and 5 hotels abroad. In a location like Goa where a hotel used to do 70 per cent occupancy I used to pre-buy his 30 per cent occupancy throughout the year. Then utilize those rooms to sell to members who had brought into my holiday schemes.
I had an input cost of 800 and I was selling at 1600. Because it was rural India, it had to be cheap.
I had a distribution cost of 200-300 so I was making 400-500. Between 2001-2005 we sold 2 crore holidays. 2004-2006 we had all the hotels full throughout the year.
The main problem started when I had excess booking. At a location like Mount Abu, Mahabaleshwar of Goa, when I used to use up my own occupancies, I had to buy at market rates. When I bought at the market rate of 2500, I was buying a commodity which I had already sold 4 years earlier for 1600. So we decided if we can have 35 hotels of our own, the tour operator money would become free for us because no hotel does 100 per cent occupancy in India. If my hotel did 70 per cent occupancy, I would bring in 30 per cent occupancy from my holiday customers. My owners and operators would not mind because I was not competing with their comp sets. I am not going to the OTAs, the travel agents of the urban masses. This is happening through my 100 sales offices in India.
We speak to every brand. We did not want to venture into an existing brand.
We brought the exclusive development franchisee for Howard Johnson for 15 years, where we will develop 35 properties for them. A lot of funds was required to complete the projects, as insurance brokers we had accumulated a lot of land parcels across India so we decided to unlock the land parcels by developing products for the same insurance advisors. The same advisor who was selling insurance worth 800 in 1996 started selling 25000 worth of stay packages from the year 2001. Now we will give him 7-8 lakh rs products and let us see how the market responds.
We started off with a 350 acre real estate scheme in Ahmedabad. We did not want to build buildings because that would take 5-7 years to build. We will give the plots to build their own houses. That money was pumped into hospitality. Our first venture was Ramada Udaipur Resort and Spa, which used to be Lotus Resorts. We took over the property and upgraded it with an investment of Rs 19 crores. The year we took over, the property was doing a frontline of Rs 3 crores, today, in the third year of operation, we have already crossed 18 crores. That is the kind of value we were able to add to the hotel.
Because of our marketing strength we were able to pick up our ARRs from 2500 to 6500 and do 90 per cent occupancy throughout the year.
Howard Johnson Bangalore, just across the road from Manyata Tech Park, Hebbal, which came up after the Ramada in Udaipur, is the prototype of the next 35 hotels. We wanted to showcase what a Howard Johnson in India would look like.
We were able to bring in a positive GoP in the third month of operation with a 90-95 per cent occupancy thanks to corporate tie ups. The aim is to launch one hotel every month, so that the Howard Johnson story does not die in India.
Rahul Rai is Executive Director of Unique Mercantile. As told to Bikramjit Ray
WE ARE primarily insurance brokers for the past 25 years. We started in 1996 at that time my father brought in the concept of group insurance in India. In 1999 when FDI was opened, we were required to do 51 pc of our own business to justify 49 per cent of broking which we were doing. We had to come up with a product that was not insurance and that was our product which we were selling in the same markets.
Because we were in the rural and semi rural sectors, we tried to find a business which would suit our existing customers. We became a tour operator selling long stay package plans over four years, seven years and ten years. -We had reverse integrated by then. I used to buy unsold occupancy from 30 hotels in India and 5 hotels abroad. In a location like Goa where a hotel used to do 70 per cent occupancy I used to pre-buy his 30 per cent occupancy throughout the year. Then utilize those rooms to sell to members who had brought into my holiday schemes.
I had an input cost of 800 and I was selling at 1600. Because it was rural India, it had to be cheap.
I had a distribution cost of 200-300 so I was making 400-500. Between 2001-2005 we sold 2 crore holidays. 2004-2006 we had all the hotels full throughout the year.
The main problem started when I had excess booking. At a location like Mount Abu, Mahabaleshwar of Goa, when I used to use up my own occupancies, I had to buy at market rates. When I bought at the market rate of 2500, I was buying a commodity which I had already sold 4 years earlier for 1600. So we decided if we can have 35 hotels of our own, the tour operator money would become free for us because no hotel does 100 per cent occupancy in India. If my hotel did 70 per cent occupancy, I would bring in 30 per cent occupancy from my holiday customers. My owners and operators would not mind because I was not competing with their comp sets. I am not going to the OTAs, the travel agents of the urban masses. This is happening through my 100 sales offices in India.
We speak to every brand. We did not want to venture into an existing brand.
We brought the exclusive development franchisee for Howard Johnson for 15 years, where we will develop 35 properties for them. A lot of funds was required to complete the projects, as insurance brokers we had accumulated a lot of land parcels across India so we decided to unlock the land parcels by developing products for the same insurance advisors. The same advisor who was selling insurance worth 800 in 1996 started selling 25000 worth of stay packages from the year 2001. Now we will give him 7-8 lakh rs products and let us see how the market responds.
We started off with a 350 acre real estate scheme in Ahmedabad. We did not want to build buildings because that would take 5-7 years to build. We will give the plots to build their own houses. That money was pumped into hospitality. Our first venture was Ramada Udaipur Resort and Spa, which used to be Lotus Resorts. We took over the property and upgraded it with an investment of Rs 19 crores. The year we took over, the property was doing a frontline of Rs 3 crores, today, in the third year of operation, we have already crossed 18 crores. That is the kind of value we were able to add to the hotel.
Because of our marketing strength we were able to pick up our ARRs from 2500 to 6500 and do 90 per cent occupancy throughout the year.
Howard Johnson Bangalore, just across the road from Manyata Tech Park, Hebbal, which came up after the Ramada in Udaipur, is the prototype of the next 35 hotels. We wanted to showcase what a Howard Johnson in India would look like.
We were able to bring in a positive GoP in the third month of operation with a 90-95 per cent occupancy thanks to corporate tie ups. The aim is to launch one hotel every month, so that the Howard Johnson story does not die in India.
Rahul Rai is Executive Director of Unique Mercantile. As told to Bikramjit Ray
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