​Cluster 1 

Park Hotels ​|​ Discussion Notes  

 
By  
Aditya Agarwal (0154/55) 
Dhanashree Badhe (0169/55) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  

Q. How would you rate the performance of Park Hotels? Why?

1. Qualitative

​ a. ​ Customer centricity/Recognition and Awards

Park Hotels set out with a target of offering better services to its customers. It was able to offer it to its
customers at a lower cost as well as is evident in Ex 7. The aim was to provide a set of differentiated
experience to its patrons so that the customers have an experience building the goodwill for the brand. The
group actively searched for lacunas in the service offerings of its competitors to see where it can enter and
make a mark. For eg., once identified, that checkout formalities were not paid as much attention in
comparison to the check-in welcome, the Park Group ensured that managers accompanied guests to their
cars during leaving to recreate the homely atmosphere. The Park strived to achieve a highly intimate and
personalised service for its clients including the design of the decor and the ambience of the hotels as
presented in pg 4 of the case.

b.​ Human Resources

Its spend on payroll as a % of revenue was lowest for Park Hotels vis-a-vis competition (Ex.1) which
might be due to its no compromise attitude with unions.
In spite of it, Park’s employees were happy as Park received the “Gallup Great Workplace Award”. It
being the only Indian firm to win along with global behemoths like Starbucks, etc shows that the
employees were engaged, thrilled to work on the job, and satisfied. This could also be derived from Vijay
Dewan and Namrata Ray’s testimony in the case.
Some of parameters which played a role were standardization of back end system while permitting plenty
of room for creativity by allowing front end to be unique across the different properties. Other parameters
include investing in employees’ career growth by providing opportunities to develop themselves.
Also the periodic get-togethers of work groups, competitions, and using awards as a medium to appreciate
the good work done by employees and improving the overall satisfaction of the employees promoted
competitiveness among the employees without compromising on the service offered to the customers.

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 c. ​ Learning Organisation
Park Hotels under Priya Paul was not afraid to experiment with new concepts and designs as can be seen
by the chain venturing into Chinese restaurant with completely unique decor, live band performance in a
club in Kolkata, retro themed bar in Kolkata, completely untested interior decor ideas for Park Bangalore
and Chennai properties. All of them were met with rave reviews and substantial success because of
differentiation from what was on offer at that time. However this daredervillism was not without its own
pitfalls. Avant garde ideas like that of the Spanish restaurant failed. However, Priya Paul was sporting and
decisive enough to go ahead and shut down the restaurant when it was not making financial sense in spite
of the restaurant being praised for its authenticity.
Being an early mover they were careful to associate their services with several category labels like the
boutique hotel segment. They also focused on creating differentiation between them and the existing major
players in the 5-star restaurant category by constantly reinventing themselves and staying contemporary.
For eg., they were the first Indian hotel to embrace SAP which in turn increased their efficiency allowing
them to become more efficient. Their “Smart Card” idea was also along the same lines allowing them to
connect with their customers on an emotional level.

2. Quantitative
Revenue per hotel was decent (Rs 347 million/yr) in comparison with the competition (Hyatt(highest): Rs
614 million/yr) basis Ex 1 in spite of them charging almost half the market leader in terms of ARR as
depicted in Ex 7A. Their repair and maintenance charge was highest along with the material cost as a
percent of the revenues. However this might be attributed to the constant renovation combined with their
ambition of achieving greater levels of customer satisfaction by providing a sublime experience.

Financially they had the highest PAT as a percentage of the revenue thus signifying strong financial
management acumen and greater control on spendings.

Thus, based on the above parameters the performance of Park Hotels could be said to be “Good” on a scale
of “Disastrous, Poor, Decent, Good, Excellent” as they were able to work their way through the levels as a
niche player in an overcrowded and competitive hospitality sector by providing differentiation to the
customers and employees. Also being a niche player, they consistently outperformed the “Goliaths” by not
playing according to the rules set by the major players. This manifested in Park Hotels receiving multiple
major hospitality awards.

Average Annual Revenue (in Rs. Million) per property

The Park Hotel Taj Hotels Oberoi Hotels Hotel Leela Hyatt Hotels ITC Hotels

347.67 200.23 251.03 506.57 614 69.94

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 Q. ​ What businesses is Park hotel in?

Park Hotels entered into the hospitality industry by aiming to differentiate itself as a niche boutique hotel
chain. This identification however, might prove to be a myopic view of the industry Apeejay Surrendra
Group is in and might force strategic blunders in terms of choices made in the future. Increasingly, hotel
chains are investing in the field of entertainment and restaurants. Thus increasing competition for the
existing set of customers and even expanding the target customer base at the same time.

Thus, Park Hotels can be primarily regarded to provide a ​deluxe customer experience​ while also
providing accommodation to its patrons as an additional offering.

From the information given in the case, Park Hotels’ business can be broken down into multiple verticals.
From Ex 2 it can be said to be present in verticals like experiential dining, hangout zones, banquet halls,
spas, fine dining restaurants, hosting high society events like art shows, etc. catering to the “young at heart,
contemporary, creative and independent” who double up as “key influencers and trend setters”.

Q. ​ Who does Park Hotels compete with?

Indian hospitality sector can be viewed as an industry which is reaching its maturity with the number of
companies investing in the sector increasing rapidly ( as seen from exhibit 4). Due to the growing
economy, major labels are attracted to the Indian hospitality sector increasing the competition.

Priya describes The Park’s as a collection of unique boutique hotels which can be very restrictive as they
cater to a larger segment of entertainment and positioning themselves only as hotels would lead to incorrect
conclusions, Park Hotel can be viewed as Deluxe Customer experience and accommodation provider.

The Park considers major players like The Leela, Hyatt or The Oberoi as their competitors but they are
merely competitors in one of the vertical segments of The Park’s businesses. The Park should also consider
businesses which cater to customers requiring banquet halls( Tantra), luxury spas (Aura), experiential
dining ( Bamboo), etc. as their competitors and develop a strategy accordingly. The Park Hotel should look
out for thematic similarities while watching out for competitors. The competitors should not be solely on
the basis of similarities in the service offerings ( taxonomic similarities). While the taxonomic similarities
will only point towards hotel chains and party places, dwelling into thematic similarities will point towards
any business catering as entertainment destination as the competitor and aid in classifying assets worth
acquiring.

The identification of verticals is crucial because while the hospitality sector (accommodation) might be
approaching maturity ( considering the amount of investments by the major hotel brands) but sector like
experiential dining is still in the nascent stage.

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 Q. ​ What recommendations would you make to Priya Paul and her management team?

Priya Paul and her management team have done an excellent job at surviving in a crowded booming sector
while catering to niche segment and continuously experimenting with new ideas in order to find
differentiating factors and leverage them. Considering the amount of resources engaged, the output in
terms of revenue and the final profit ( in %) is quite decent. But here are some of our recommendations for
The Park’s management team:
a) Focus on the Corporate Segment : The corporate customer’s share of revenue is rapidly decreasing
as seen from Exhibit 7B. Major actions should be taken in order to make sure that these customers stay in
loop.
b) Acquire Assets : Most of the corporate segments are looking for greater network and also, to
increase presence in cities like Pune where the share of luxury in additional supply is greater than existing
supply, which shows an exponential increase in the demand for luxurious stay options, The Park should
consider expanding by acquiring assets which resonate with the company's goals.
c) Focus on improving the numbers : The Average Revenue per room differs by a large margin in
some of the cities. A standardized pricing policy could be adopted to reduce the difference and increase the
revenue in the long run. While, efforts should also be placed to increase the average days spent by
customer in the hotel accomodation and steps should be taken to increase it. Also, the revenue per available
room has dropped by almost 20% for all the cities in 2 years as seen in exhibit 7 A. While the team is
projecting the business as niche segment, the pricing or revenue per room should be priced premium in the
future to ensure steady larger cash flows. Also, the percentage of leisure customers as a share of revenue is
decreasing which does not align with business’s tagline of being the customer’s place to hangout and
unwind. Also, the spending on maintenance and other overheads is high as compared to the industry
standards and should be monitored to ensure that necessary steps are taken to avoid excess spending.
d) Continue hosting art galleries : The consumer base opting for the high end products might be
similar as the ones who would want to go for exotic art pieces. Though there is an absence of taxonomic
similarity, The Park hotels should find such ideas and experiment with them to find the ideas which work
the best.
e) Increase the scope of business: The management team should work towards identifying different
verticals and focus on different segments of business with relevant strategy according to the industry life
cycle. The scope of business should be increased from boutique hotels to a Deluxe way of living ( or
something similar).

Сonsult your own legal counsel about exact wording 

This document is meant to serve as a reference