INDIAN HOTELS

COMPANY LTD.

Group 7
Sujit Patel – ABM10016
Akshay Gambhir – PGP29118
Kaustav Das – Pgp29130
Prashant Nagpal – PGP29158
Nikhar Kedia – PGP29173
 Acknowledgements
As part of our report, we would like to extend the sincerest gratitude to Prof. Amita Mital, our
Professor for Strategic Management-1, for her constant guidance and support during the course
of this project.
We would also like to thank Mr. Gautam Girme, of PGP28 batch at IIM Lucknow, whose
insights from his internship at Indian Hotels Company Limited proved valuable in the research
and the outcome of this project.

Executive Summary
Indian Hotels Company is the hospitality arm of the Tata Sons conglomerate. The object of our
project was to evaluate the external and internal environment of the company, to determine what
its strategic advantages were and how sustainable they were. And based on the finding suggest a
viable corporate strategy for the coming years.
The last few years have been rife with instability for all industries and hospitality was no
exception. The economic trends are still very favorable to developing nations but the recent
safety issue for women in India has the potential to be disastrous is not rectified. Technology
will play an important role in the years to come but is not critical as of now. There are some very
strong entry barriers for the industry but intense competition within the industry nullifies this.
The company enjoys the same love and admiration that is characteristic of the entire Tata group,
this gives it great bargaining power.
A modified version of the Porter’s value chain was used to evaluate the internal competency of
the company. IHCL is the country’s largest hospitality chain with more than a hundred hotels
and almost half as many in the works. But some bad investments and stalled projects are hurting
their international aspirations. It has repeatedly demonstrated extraordinary commitment to
service, a feature that can be attributed to their HR practices and strong firm culture. They are
highly leveraged and is vulnerable on that front but it’s a common feature across the industry.
Taj group has recently started rebranding its properties into four different brands to pursue a
market segmentation strategy. This along with the addition of Ginger an economy brand makes
them positioned to capture greater value. Also the specialty F&B restaurants in their hotels are
doing really well, they already have the second largest market share in the country after
Dominoes.
Given their strategic advantages, the greatest of which is their brand name, we recommend
expanding in the same industry by targeting the mid-range segment which has been left untapped
so far. Alternatively they could expand their F&B offerings to stand alone restaurants in cities
where they are not planning a hotel. Both alternatives look promising and a quick viability test
was performed which yielded positive results.

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Contents
Acknowledgements .......................................................................................................................... i
Executive Summary ......................................................................................................................... i
Introduction ..................................................................................................................................... 1
Methodology ................................................................................................................................... 1
External Analysis ............................................................................................................................ 2
PESTLE Analysis ....................................................................................................................... 2
Porter’s 5 Forces Analysis .......................................................................................................... 4
Internal Analysis ............................................................................................................................. 5
Taj Hotels Resorts and Palaces ................................................................................................... 5
Vivanta by Taj............................................................................................................................. 7
Gateway by Taj ........................................................................................................................... 9
Ginger Hotels ............................................................................................................................ 10
Value Net ...................................................................................................................................... 11
Suppliers ................................................................................................................................... 11
Buyers ....................................................................................................................................... 12
Complementors ......................................................................................................................... 12
Substitutors ............................................................................................................................... 12
Strategic Advantage Profile .......................................................................................................... 12
Alternatives ................................................................................................................................... 13
Expanding into Midscale Domain ............................................................................................ 13
Related services Expansion....................................................................................................... 14
Exhibits .......................................................................................................................................... iii
References ...................................................................................................................................... iv

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 Introduction
The Indian Hotels Company, known ubiquitously by its iconic brand the Taj Hotels, is a part of
the Tata Group conglomerate. The incident that led to the launch of the hotel chain is a popular
tale, Jamshetji Nusserwanji Tata, founder of the Tata Group, was denied entry at the Watson's
Hotel in Mumbai, as the hotel did not permit Indians, who were non-white. Hotels which
accepted only European guests were then very common across British India. J.N. Tata swore to
start his own hotel which would be the grandest ever seen. True to his word the Taj Mahal Palace
& Tower, the first Taj property and the first Taj hotel, was opened on 16 December 1903. The
building overlooking the Arabian Sea is a landmark which dominates the Mumbai skyline.
Starting in the late-2000s, the Taj group started rebranding its properties into four different
brands, in a market segmentation strategy.
Taj Luxury The luxury brand is the erstwhile generic brand of the Taj Hotels Resorts and Palaces.
These hotels cover business destinations, landmarks, palaces, resorts and forest destinations.
Most of Taj's oldest and most prestigious hotels have been retained under this brand. Two
specialty brands under the Taj are Taj Exotica, the premium resort brand in Maldives, Mauritius
and Goa and Taj Safaris, Taj's nascent wildlife lodge brand. It is expected to cover Taj's
premium, high-end forest lodges and destinations. Currently, Taj's luxury lodges in the national
parks of Central India carry this brand.
Vivanta by Taj Vivanta is a mid-segment contemporary-luxury mix hotel brand. The brand caters
to the executive class and is positioned just between the flagship Taj brand and the Gateway
brand.
The Gateway Hotels and Resorts Gateway is also mid-segment brand, positioned below Vivanta.
It has properties in both business and vacation destinations. The hotels are positions at economy
guests looking to move up the value chain.
Ginger is the economy segment chain, established by Roots Corporation Limited a fully owned
subsidiary of IHCL. It’s the newest brand in the fast emerging category of smart basics hotels.

Methodology
We started with the external analysis, which included the studying the external environment in
general to identify the trends in the market which could be exploited to gain a strategic
advantage, we used the PESTLE framework for this. The external analysis also included the
Porter’s 5 forces analysis, this gives a better understanding of the external conditions which are
related to the industry.
After the external analysis we did the internal analysis, this was done using an adaptation of the
Porter’s Value Chain. The original Value Chain was meant for manufacturing firms and was not
directly applicable to the services industry, instead we used the value chain for services as
defined by Prof. Elisante ole Gabriel in his paper “Value Chain for Services”. The value chain

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for services (VACSE) as described by him analysis the firm’s primary and secondary activities
with respect to the value added for consumers of the service. This analysis helps us identify the
strength of our activities and places where we can improve to increase the value for consumers.
We disaggregated the company into the four main brands for the value chain analysis, this was
done as the activities performed by each of them to create value were quite different and varied
due to the segment they targeted. The internal analysis also included the Value Net framework,
this framework was used to evaluate the company at an aggregate level and use learnings from
the value chain analysis to see how the company appropriated value from the different players.
After the internal and external analysis we made a strategic advantages profile for the company
and evaluated different alternatives available to them.

External Analysis
PESTLE Analysis
Political
The terrorist attack in Mumbai was a watershed event. There was a marked decline in the local
tourism after the event. Taj group was not particularly affected any more than the other hotel
chains by the attack because of the heroic efforts made by the Taj employees to safeguard the
lives of their guests.
Economic
The global economy has been in flux since 2008 but the last year was particularly stressful to
real estate and related business. As seen in the annual report of IHCL the company has decided
to book an extraordinary item of loss to the tune of INR 432.91 crore out of which INR 373 crore
was due to a devaluation of many of their foreign properties and investments. On the other hand
there was a devaluation of the Indian currency by almost 20%, this has helped IHCL which is
mainly based out of India and declare their results in INR as they would be generating greater
revenue from their foreign holding. Also the weaker rupee has led to a growth in the Indian
tourism.
There has been a greater growth in the Indian and Asian tourism as compared to the global
industry standard. Global tourism grew at 4%, tourism emerging economies grew at 4.1% and
Indian tourism outperformed both of these at 5.4%.
Socio-Cultural
The safety and security provision of women in India, an issue which has recently come in full
public glare after a series of highly sensationalized assaults on women, has become a growing
concern to the foreign tourists. This might lead to a decline in women and family travelers.
Chinese have become the world’s most prolific travelers, to the extent that the JW Marriott has a
special Chinese welcome desk. If the Indian hotels can also work in this direction it might lead to
some first movers advantages.
Social media and the ubiquity of the internet paired with a greater trust of technology and people
connected by it is leading to a growing tread to P2P lodging. Almost 20+ P2P lodging services

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are said to about reach critical mass. One such website is Couch-surfing where people go online
to connect with other over the internet and find someone who is willing to let them sleep on their
“couch”. These services are trying to increase the usage of idle resources by letting people rent
their apartments and cars to travelers while they themselves are traveling and so not using their
stuff. This has become easier as testimonials for prospective renters from people you know has
added a social element which makes it much more effective. This trend is a cause for concern to
hotel chains which were already fighting hard to increase occupancy rates. Hotels are also using
the social media to personalize their customer services to deliver greater customer delight.
Example Moxy, a joint venture between IKEA and Marriott, tries to make the guest feel special
by trying to give them what they like. Also as a result of the growing popularity of the social
media the online reputation of a hotel has become very important. Organizations are improving
their online reputation by monitoring relevant comments made via social media channels such as
Twitter. These comments can then be answered and addressed by both marketing and operational
personnel.
Technology
The rise in omnipresence of internet has led to a drastic change in the way hotel expect their
room bookings to come in. The brick and mortar travel agents are a thing of the past and are
being quickly replaced by the online counterparts. In this scenario there is a great opportunity for
hotels to build their own website which offer the same convenience of reservations at the most
competitive prices.
The use of mobile devices to access the internet is also on the rise. City Nites a UK based
serviced apartment allows its employees to check-in their guest using iPads so that the entire
check-in process has become much more informal.
Growth in software and communication technology is leading to an integration in the software at
all points of sale within a hotel, be it the check-in desk, the restaurant or the gift shop. This is
making it possible to get a clearer overall perspective on the revenue generated from a single
guest. It also makes it possible for hotels to better track spending patterns of guests and offer
specialized service. For example a hotel noticing a high spending guest not eating in the hotel
restaurant might offer special discount to encourage trial.
Legal
The legal systems in the country are still maturing. There are still traces of the License Raj era. It
takes 125 clearances to open a hotel in India, while it takes 25 in Singapore. There have recently
been some land lease issues for the Taj Man Singh in Jaipur which have highlighted this
problem. Also the inconsistency in policies add to the complexity, for example the change in the
legal drinking age from 21 to 25 in Maharashtra and the curfew timing in Bangalore have been
widely criticized as a major reason for flagging revenues.

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Porter’s 5 Forces Analysis
Buyer Power
In this competitive industry with low switching costs, brand innovation helps in attracting and
holding customers by quality, price or a specific target age group for example. Buyers are generally
price sensitive, except in the premium market. Innovation, such as gym, spas etc., is also vitally
important in attracting customers, as competing on price alone can be difficult. Larger companies
have implemented loyalty schemes, by offering a points system which reduces buyer power.

As customers are numerous and mostly small in size, their buyer power is reduced, since the impact
of losing one customer is not a significant threat to business. However, as many of the countries
with a heavy reliance on the tourism industry have discovered, the reduction in the number of
holiday makers and overall travelers’ number means that buyer power has increased, as consumers
have more options available, often at a lower price point.
Supplier Power
Suppliers in this industry are defined as property owners, developers and real estate companies,
interior design and furnishing companies, architects, management and training service providers,
marketing companies, industry consultants, and information and computer technology (ICT)
manufacturers.
Real estate companies are often much smaller companies than hotel and motel operators and rather
than being globalized, they are usually local to the property they develop, which reduces their
financial muscle and ability to negotiate favorable contracts. Furthermore, hotels can integrate
backwards and operate their own real estate business.
Hotel operators are reliant upon sophisticated technology and systems, including technology
utilized for property management, procurement and reservation systems. Applications, databases
and networks must integrate easily with each other and third-party systems to facilitate
collaborations with partners. This strengthens supplier power.
New Entrants
The hotels & motels industry is strongly influenced by travel and tourism trends. In India, travel
and tourism has been growing significantly in recent years offering an attractive prospect to
potential new entrants. It is possible to enter the industry in a relatively low-key way by opening
a small, independent hotel or motel as a sole proprietor. However, the industry is capital intensive,
and for a large-scale entrance, upfront investment in buildings, décor and furnishings, ICT
infrastructure and staff is expensive. The more demanding customer of the future will want to
engage with a hotel across all touch points (i.e. text, email, and social media) where appropriate.
As tourism is not a vital consumer good, it will tend to be cyclical and travelers are increasingly
expecting bargain rates while refusing to tolerate lapses in quality and service. To sustain revenue
growth in the premium market, operating a chain of hotels is often an important strategy as it
reduces dependence on tourism in any particular location. The purchase, leasing, and management
of property may involve legal and financial complexities, necessitating spending on professional
services.

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Threat of Substitutes
Substitutes to hotels and motels include alternative forms of leisure accommodation, such as
camping facilities or recreational vehicles, or informal accommodation with friends and family.
Switching costs range from negligible to high. While all these substitutes offer the same basic
function of a place to stay, up-market hotels and motels often provide added benefits, such as spas
and restaurants. Additionally, whilst some of these substitutes offer reduced costs to hotels and
can undercut the hotels and motels industry, this switch is often out of necessity rather than choice,
so when consumers are in a more generally affluent position, the threat from substitutes is likely
to decline.
Degree of Rivalry
There are a large number of independent players present in the industry increasing competition the
budget segment.(Exhibit 1) Many larger operators have diversified to some extent and own
additional businesses, such as casinos, restaurants and shops. To attract and sustain more business,
operators try to offer more complex packages and value-added services, such as free breakfast and
parking, free third night, etc. The largest hotel and motel operators are fairly well insulated from
unpredictable market conditions by geographical diversification. However, others are based
largely or exclusively in one country.
Exit barriers in the industry are fairly high because most of the major tangible assets are highly
specific to their industry, and thus harder to divest. This is a likely motivator for many of the global
leaders to pursue expansion through franchising and hotel management services, as well as through
the acquisition of properties. Many big chains have adopted an asset-light business model in order
to fuel expansion; selling off assets has allowed large competitors to raise capital and invest in
expanded operations, which again intensifies the competitive nature of the industry.

Internal Analysis
The internal analysis of the company can be split into its four principle offerings Taj
Hotels Resorts and Palaces, Taj Vivanta, Taj Gateway and Ginger.
Taj Hotels Resorts and Palaces
People
Taj Hotels and Resorts are well renowned for their HR practices and employee engagement.
Training programs for employees are specially designed to empower them to be decision makers
rather than just training them. The organization culture revolving around customer service is
engrained in employees across ranks and locations. For instance, researchers have found displays
of gallantry at the at the Taj properties in Maldives at the time of tsunami in December 2004,
similar to numerous stories of bravery by Taj employees during the 26/11 Mumbai attacks.
The selection criteria that is used to evaluate and hire employees is centered on values, integrity
and the cultural fit of the candidate. This ensures that the customer centric culture of the
organization is not diluted as the workforce expands. The company has a Special Thanks and
Recognition System (STARS) that links customer delight to employee rewards. This ensures that

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employees continue to be motivated towards customer service and delight. Managers are
encouraged to express appreciation of good work done immediately, rather than waiting for
reviews for the same.
Physical Aspects
The chain has 93 hotels in 55 locations in India and 16 international locations. Very high
importance is given to acquiring properties in prime locations which enable the hotels to provide
best service to the customers. The hotels are armed with state of the art specialty restaurants and
luxury spas. Stores showcasing artefacts and collectibles created by craftsmen of India and a
selection of garments, stoles, shawls and accessories from Indian designers, called Taj Khazana
are located at select Taj Hotels in India.
Punctuality & Reliability
Various Taj hotels and restaurants across locations have received numerous awards recognizing
the high quality of reliable service provided to guests. Taj properties continually are ranked
highly in various global luxury hotel rankings. The brand is a globally renowned name in
provided contemporary luxury experience to guests.
Service Design
A great deal of emphasis is given to customizing cuisine and service around cultural sensitivities.
Globally renowned loyalty programs ensure that switching costs for customers is high and ensure
repeat business for the hotels. Taj also runs a travel business called Inditravel for providing
domestic and international tickets for guests. Through TajAir, a fleet of aircrafts is available for
flying in/out business customers and guests in social occasions held at the hotels. Thus, the group
caters to a large base of needs for its customers.
Knowledge Management
Taj takes extreme care on maintaining and consolidating its brand. Re-branding efforts are
implemented for newly acquired properties across global locations. The globally recognized
brand is focused on providing a truly Indian luxury experience to guests, emphasizing on the
traditional Indian values of treating guests as gods.
Delivery Systems Management
To make bookings and reservations easier and more convenient for travelers, dedicated websites
have been created with focus on use of ease. For bookings on phone, 24X7 hotlines have been
set-up in various countries for making reservations for any location worldwide.
Moment of Truth Management
To ensure high quality and timely services for guests, Taj Hotels deploy a fairly high staff-to-
room ratio of 1.75. The restaurant menus are designed to cater to specific tastes of customers and
special care is taken for preferences, like introducing more and more vegetarian dishes for High
Net-Worth clientele. Some properties maintain a fleet of vintage and classic cars for a unique
luxury experience for the guests.

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Service Competition
Taj competes with a variety of hotel chains across multiple locations globally. In India, its main
competitors are Leela, Oberoi and ITC Hotels. Internationally, it competes with various names
depending on the location. By offering an award winning service and catering to several needs of
its customers, Taj remains the top player in the Indian Hospitality segment.
Vivanta by Taj
People:
The staff of Gateway are hired from smaller cities and towns such as Pune, Chandigarh, and
Dehradun etc. because they believe that traditional Indian values such as respect for elders and
teachers, humility, consideration, discipline, and honesty that the hotel chain holds key to their
service, lies not in the metropolitan cities. This is perhaps their most valuable resource, and is
reflected not only in the fact that they have the highest employee retention rate but right down to
their training, which lasts 6 months more than the industry average, and selection process.
Vivanta ensures that the company imparts three kinds of skills: technical skills, so that
employees master their jobs (for instance, wait staff must know foods, wines, how to serve, and
so on); grooming, personality, and language skills, which are hygiene factors; and customer-
handling skills, so that employees learn to listen to guests, understand their needs, and customize
service to meet needs.
Process information:
The processes followed by the Vivanta chain, are quite similar to the Taj. This may be rooted in
the fact that 19 of the 28 strong hotel chain were in fact converted from Taj hotels. In addition to
this they were quick to implement ERP systems to help their complex sourcing and procurement
which included perishable items and other consumables from across the world.
Physical aspects and firm infrastructure:
With properties in prime locales along 28 hotels in 22 locations and 15 more in pipeline, it serves
as an extensive network of properties,
The Vivanta group maintains it hotels across a mix of high frequency holiday locales such as
Goa where they have 3 resorts, to corporate business destinations like Mumbai where they have
2 hotels. "Vivanta by Taj is wired hard to work and play. It is extremely efficient in delivering
work and play environment. It has high-energy bars and very good gyms. Spas will be differently
designed for a shorter treatment than luxury hotels. The customer doesn't have the time but must
still experience the hotel. He doesn't want formality, he likes more relaxed service," says Harris,
who is heading Taj Vivanta since 2012.
Vivanta has also tied up with Warner Wong, Honk Kong and Whitefield Designs in Bangalore
for their upscale construction requirements including restaurants. Their alliance with Inditravel
also gives them access to Jaguars, Mercedes Benz and other high performance vehicles that their
customers would want.

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Punctuality and reliability
They have a 70-85% occupancy rate which is on par with their competitors in terms of
reliability.
Service design
As many as 155 touch points have been identified from before the guest arrives till he leaves
where Vivanta by Taj can create a differentiation. According to Harris, the chauffer to the guest
will hold an electronic placard at the airport; the car to the hotel will have a massage chair, a
Sony PlayStation and energy drinks instead of plain water. They have also created the Jiva Spa
service which allows for an extensive spa service. For example, one can choose from their
incense sticks, or body wash blends to their customized yoga mats and spa linen. Their signature
treatments have also drawn non-resident visitors and this has led to the Jiva line having its own
customer loyalty program.
Their restaurants run on the philosophy that items should be “tasty and healthy”, for this they
have a line of international chefs and mixologists that revamp and add to their menu from time to
time. They were also the first of the Taj brands to focus on regional cuisines, each Vivanta boasts
a restaurant that carries the favour of that region. They are also a part of the Taj Inner Circle
program which has been acknowledged as one of the best customer relationship management
programs in the world.
Knowledge management
Their managers at the front desk are well informed not only about the services across their
particular hotel, but across a large number of the Taj hotels. The chain also takes great care to
integrate their customer loyalty program with other services like Inditravel and Jiva spas. In
addition to this Vivanta has also been very active on social media such as Facebook and
TripAdvisor to disseminate any information regarding bookings or offers to people with a
turnaround time of less than 12 hours on an average.
Delivery Systems management
Apart from a well-trained setoff personnel, and top of the line infrastructure whether its hotel
features like location or cars, to exotic menus Vivanta manages the delivery of their service
efficiently. They also have feedback forms readily available at many junctions so that people can
express their dissatisfaction about any service. The Vivanta management believes that staff will
interact 40-45 without supervision times during the day with customers. In order to do so they
must manage to sort out issues, and deliver delight each time without having to go to their
superiors
Moment of truth management
Apart from being very active on social media, the Vivanta website is also very extensive. Not
only can one book services for a hotel, but also book transport and other services like restaurant
reservations or spa bookings. The hotel chain also enjoys a 4-star out of 5 rating on most portals
for their front desk service.

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Gateway by Taj
People:
The people policies are Gateway are similar to Vivanta, except the difference that they try get in
regional people to match their service. Values and Culture fit are a vital component in the
selection process.
The company imparts three kinds of skills: technical skills, so that employees master their jobs
(for instance, wait staff must know foods, wines, how to serve, and so on); grooming,
personality, and language skills, which are hygiene factors; and customer-handling skills, so that
employees learn to listen to guests, understand their needs, and customize service or improvise to
meet those needs.
Process information:
The processes followed by the Gateway chain is similar to Vivanta.
Physical aspects and firm infrastructure:
The Gateway Hotels & Resorts currently have 24 hotels with plans of expanding to 42 hotels in
the next few years.
A relaxed, refreshing and contemporary experience across different zones - enter, stay, hangout,
meet, work, workout, unwind and explore to better deliver the brand promise. Be it 24/7 , the
belief that all key hotel services should be available round-the-clock, or menus that help you take
advantage of what every day has to offer, the focus is always on creating sanctuaries that refresh,
refuel and renew the modern day traveler. 'In-room yoga’ amenities for the yoga enthusiasts;
'explore' - packages that lend themselves to exploring the destinations our hotels are located in.
Punctuality and reliability
They have 80% occupancy rate which is best in the industry.
Service design
Offering the highest consistency in quality, service and style Gateway proclaims to take the
unwanted surprises out of travelling. This has been implemented by allowing employees to be
trained and make autonomous decisions that allow them to serve the customer swiftly.
The services are available 'round the clock', whether it is breakfast at 2 pm or laundry at night.
The services at Gateway understand the needs of the modern nomad and keeping them in mind,
they are more flexible. The 24/7 breakfast, business services, fitness center, laundry, eat in (in
room dining) makes the stay productive - whether you are there for business or leisure.
They are also a part of the Taj Inner Circle program which has been acknowledged as one of the
best customer relationship management programs in the world.
Knowledge management
Their managers at the front desk are well informed not only about the services across their
particular hotel, but across a large number of the Taj hotels. The chain also takes great care to
integrate their customer loyalty program with other services. In addition to this Gateway has also

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been very active on social media such as Facebook and Trip Advisor to disseminate any
information regarding bookings or offers to people.
Delivery Systems management
Gateway offers relaxed, refreshing and contemporary experience across eight zones - enter, stay,
hangout, meet, work, workout, unwind and explore to better deliver the brand promise. Be it
24/7, the belief that all key hotel services should be available round-the-clock, or menus that help
customers take advantage of what every day has to offer, the focus is always on creating
sanctuaries that refresh, refuel and renew the modern day traveler.
Moment of truth management
The Gateway focuses on flexibility, round the clock services, and keeps the modern business
nomad in mind. The staff is trained accordingly to handle the customers, delivering customer
delight. A best in industry staff to room ratio helps in accomplishing this.
Ginger Hotels
People
Leadership: Roots Corporation Limited (RCL), the subsidiary of IHCL that operates Ginger
Hotels, is managed by Prabhat Pani. A post-graduate diploma holder from IIM Ahmedabad, Pani
has won many accolades for his management abilities, including the DataQuest award for
Leadership in Business Technology.
Management: Roots Corporation is run by a staff of approximately 300, and oversees the
operations of the Ginger Hotel chain, most of which is run under Management Contracts with
third parties. In line with Tata group’s philosophy, heavy investment is made in Training and
Development of management personnel.
Staff: The investment in T&D is extended till staff level, with particular focus on multi-skilling.
Focus is also provided on front-desk staff, who are trained as pseudo-managers, and are
responsible for smooth operations in addition to customer contact duties. These activities help
Ginger keep headcount low and save on payroll costs.
Process Information
Front-desk staff at the Ginger need to have knowledge of all other Ginger hotels, to ensure no
opportunity for cross-selling is missed. Ginger also follows Customer Resource Management
using end-to-end ERP systems to manage inventory and customer data.
Physical Aspects
The Physical Aspects of Ginger have been designed using SmartBasics™, a concept developed
by renowned Strategist CK Prahalad. SmartBasics™ is a philosophy of “intelligent, thought-out
facilities and services at a ‘value’ pricing”. Essentially, this involves ensuring the hotel has all
facilities needed by the modern customer, while ensuring their simplistic, no-frills nature to
minimize costs.
The Ginger hotels therefore provide access to room service, multicuisine restaurants (The Square
Meal™), Internet zones, conference rooms, laundry facility, gymnasium and on-site ATMs to all

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customers, in addition to utilities such as mini-fridge, Wi-Fi, tea/coffee maker in each room. The
Hotel has also added value in the bedding, with the SmartSleep™ mattresses designed to provide
orthopedic support and pressure-point relief to ensure a good sleep.
Punctuality & Reliability
Ginger hotels ensure reliability by ensuring rooms are available when needed, and issues related
to overbooking do not arise. Comfortable occupancy rates of 65-70% ensure this.
Service Design
The Service Design of Ginger has evolved with time. Starting with the minimalist SmartBasics™
philosophy, guest interaction was also kept to a minimum to save on costs. This included
compromising on what seemed like surplus services, like room service and others were not
offered. Instead, guests were allowed greater access to these services at their own effort. Indeed,
the original tagline of Ginger Hotels was “Please Help Yourself”, which summarizes this policy
aptly. However, with expansion it was seen that these services were considered essential by most
customers, and room service is now offered across the chain.
Knowledge Management
In order to ensure that the chain stays in touch with customer needs, Ginger has designed an
extensive feedback and monitoring system. Customers are requested for feedback at the check-in
desk, by the staff as well as via forms. In addition, the hotels have dedicated kiosks for quick-
feedback.
In order to ensure customer knowledge and expectation management, the chain has majorly
relied on online promotion. Given that audience engagement is higher on webpages, this format
has helped lessen the information gap about Ginger services.
Moment of Truth Management
When it comes to the first contact with the customer, Ginger Hotels relies on its trained Front
Desk staff, its SmartBasics™ design and price to woo the customer. At the separation point, the
policy of no hidden charges helps in customer relationship management.
Service Competition
Being in the Budget Hotel segment, Ginger in in an increasingly competitive space, with
competition both from the unorganized and organized sector. With the entry and expansion of
new chains such as Ibis, Hilton Garden Inn and Peppermint Hotels, Ginger enjoys its position of
segment leader to deliver value.

Value Net
Suppliers
Suppliers to the hotel industry include those defined as well as trained staff and personnel.
According to a survey of hotel suppliers, Tata and Taj’s professionalism and fair dealing
practices have earned them the position of the most favored buyer from multiple vendors. This,

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in addition to IHCL’s ability to leverage their position as a big chain to squeeze maximum
discounts out of vendors, helps them appropriate value from their suppliers.
IHCL also owns the Institute of Hotel Management, Aurangabad. The institute, in tie-up with the
University of Huddersfield provides IHCL prime access to talent for its different chains.
Buyers
In addition to increasing value-add for customers from their service design, physical aspects, and
other aspects described in the value chains above. In addition to this, Indian customers have a
slightly higher willingness to pay for IHCL due to the exceptional brand equity the Tata group
enjoys in India.
Switching costs are built-in the luxury, upper upscale and upscale segments via the Taj Inner
Circle loyalty program that stretches across the three premium segments. However, international
chains such as the Starwood Group can get significantly higher value from their loyalty
programs. (Exhibit 2)
Tata is also in line with Industry Standards when it comes to increasing contribution from Food
& Beverages as opposed to the traditional room occupancy revenue.
Complementors
Luxury and Upper Upscale
The Taj group owns and operates multiple wholly-owned subsidiaries which help provide both
value-added and complementary services to customers. Businesses such as Indi Travel, Jiva Spa,
Taj Safari, Taj Air and Taj Cruises provide key services in the top two brands.
Upscale
Gateway has tied up with the Bihar School of Yoga to deliver ‘In-Room Yoga’ service to
customers, most of whom are corporate.
Budget
In order to save on costs of operation, Ginger has tied up with various chains to provide non-core
services to guests. This includes F&B outsourcing to chains like Café Coffee Day and Khaaja
Chowk, laundry services to Jyothi Fabricare, housekeeping to Forbes Concepts, etc.
Substitutors
Given IHCL’s presence across the hotel segment, as well as diversification into related services
such as restaurants, catering, luxury serviced apartments, etc., the substitutors for the business
tend only to be competitors in the respective segments. Thus, where the Taj competes with JW
Marriott, Ritz-Carlton, etc., the restaurants compete with other luxury full-service restaurant
chains. For the hotel business, Exhibit 1 lists the substitutors.

Strategic Advantage Profile

Combining the analyses above, the SAP for IHCL looks as follows:
Internal Area Competitive Strengths and Weaknesses

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 Marketing & • Market Leadership across segments where it operates
Distribution • Presence across the organized sector – Budget to Luxury
• Strong Brand Equity in home markets
• Ineffective pricing strategy of Ginger Hotels
• Award-winning Loyalty Program
Research & • Firm competence in launching new services in Indian Market
Development • Deep knowledge of the Indian hotel industry
• Access to competitive and industry-leading talent at all levels
Operations • Channel power over suppliers
• Excellent relations with suppliers
• End-to-end travel and tourism services via subsidiaries
• Industry-leading room-to-staff ratios
Corporate • IHCL is the biggest player in the Indian hotel industry
Resources • Subsidiary of one of India’s biggest conglomerates
• Reputed for lower labour turnover
Finance • Highly leveraged, however better than close competitors
•

Alternatives
Combining the external analysis and internal analysis, we have generated the Strategic Advantage
Profile, which highlight that the biggest strength of IHCL is its brand equity, not only with
customers but with other stakeholders like suppliers, investors, and employees. The company is
highly leveraged which encumbers rapid expansion, while operational issues like occupancy rate,
Ginger’s consolidation, and limited impact of “The Inner Circle” need to be sorted out.
Given this scenario IHCL has two broad options, to leverage its’ brand to expand within the same
industry targeting a new and as yet untapped segment or expand in the adjacent service industries
where it can leverage its considerable expertise and wide recognition. With overall positive
forecasts for industry and economy, backed by IHCL’s strengths, the mid-scale segment between
Ginger and Gateway is an opportunity which can be considered. But factors like high debt,
cannibalization, and rapid expansion by competitors will play a vital role in the eventual decision.
IHCL can also venture into associated business like housekeeping services (low value), Spas and
other luxury treatment services (already present), service apartments, and high end restaurants.
With the luxury image of Taj, service and brand competency, high F&B share, a subsidiary of
Taj into the high end restaurant business make a great strategic fit. The fact that restaurants with
Taj hold the second highest market share after Domino’s in the food services industry make the
proposition all the more appealing.
Expanding into Midscale Domain
Given the strength of the Taj and Tata brands, and the growing demand for hotel rooms in both
premium and non-premium segments, one of the options available to IHCL is venturing into the
only hotel segment where they currently do not have a presence: Midscale.

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Industry Structure: Rivalry
The midscale hotels in the organized sector consist of brands by almost all major players: Hyatt
House and Hyatt Place by the Hyatt Group, Marriott’s Courtyard and Fairfield chains, Holiday
Inn from IHG, and Accor’s Novotel and Mercure brands all lie in this segment.
With improvement in the economic environment and demand for tourism set to rise, midscale
hotels are expected to almost double in capacity over the next 5 years, from nearly 32000 rooms
currently to 63000 rooms by 2017/18. This is due to rapid expansion by global chains in India,
especially Marriott with 18 properties currently and 51 more signed (Exhibit 3), with demand
for hotel rooms expected to grow by annual 5.4%, the supply of rooms in 5 years shall be much
in excess of demand. In addition, given that this expansion shall primarily be in Tier-II areas, in
the next few years all viable areas shall already have a presence of a major chain-led Midscale
hotel.
IHCL’s entry into this segment therefore shall be as a market follower, if not laggard. This is a
position they are somewhat new to, having pioneered the luxury and budget segments and
ventured early into the Upscales.
Investment Viability
A rough analysis of projected cashflows for a midscale venture by IHCL is given in Exhibit 4.
As can be seen, the NPV of such a venture (discounted at a WACC of 10%p.a.) is over
₹650,000. While the project seems viable, however value added per share is less than ₹0.0008
for the over 807 million paid-up equity shares.
Such a project would also require very heavy capital investment, over ₹300 million. Given
IHCL’s already highly-levered capital structure, raising amounts this high would carry
significant risks for the company.
Related services Expansion
Trends
The segment forms 57% of food service industry, growing by 12% to reach Rs 2827 billion in
2012, with 3% growth in outlets reaching 675000. The fastest growth has been in pizza FSVs at
23%. Eat-in sales account 98% of vale as customers prefer the full dining experience.
The growth has been driven by Tier I and Tier II cities, with customers willing to experiment with
unique formats, innovative menus and exciting themes. Pizza growth has been driven by increase
in expat population, acceptance of western food habits, and the new target segment – children and
young adults.
Competition
Domino’s Pizza leads the industry with 23% market share, followed by IHCL owned restaurants
at 14%. The aggressive expansion of the companies like Jubilant, Yum Foods, and Bistro etc. is
fuelled by the franchise model, but the fine dining segment is captured in value by independent
restaurants. Barbeque Nation by Sayaji Hotels Ltd. Is looking at aggressive expansion by securing
an Rs 1.2 billion PE fund. The competitive landscape is only going to heat up.

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Prospects
The FSV category is slated to grow by 3% through 2013-17 to reach Rs 3242 billion. Higher
disposable incomes, changes in lifestyle and a lack of time to cook food will drive the sales of full-
service restaurants in the forecast period. With emergence of a large number of chained and
unchained players in FSV, companies will have to differentiate themselves by value-added
services, enhanced ambience, and better customer experiences
High operating and rental costs, increased competition, and shifting preferences to fast food pose
challenges.

Exhibits

Exhibit 1Rivalry Across IHCL's Hotel Business

Hotel Chain Loyalty program Membership (mn) Contribution to Room Rev.

Starwood Starwood Preferred 25 (2010) 50% (India)

Hyatt Hyatt Gold Passport 14 33.5%

Marriott Marriot Rewards 40 (4.2 APAC)

IHG Priority Club Rewards 73 41%

Accor Le Club Accor 10 14%

IHCL Taj Inner Circle (TIC) 0.36 13%
Exhibit 2 Major Hotel Loyalty Programs in India

iii
 Exhibit 3 Marriott Expansion Plans in India

Yr 0 1 2 3 4 5 6 7 8 9 10 Terminal
Cash Flows
Rooms 200 460 720 980 1240 1500 1500 1500 1500 1500 1500

Occupancy 0.3 0.3 0.35 0.35 0.4 0.4 0.45 0.5 0.52 0.55
Rate
Annual CapEx (₹40,000.00) (₹52,000.00) (₹52,000.00) (₹52,000.00) (₹52,000.00) (₹52,000.00)

Total CapEx (₹40,000.00) (₹92,000.00) (₹144,000.00) (₹196,000.00) (₹248,000.00) (₹300,000.00) (₹300,000.00) (₹300,000.00) (₹300,000.00) (₹300,000.00) (₹300,000.00)

Revenue ₹0.00 ₹120,503.73 ₹277,158.58 ₹506,115.68 ₹688,879.67 ₹996,164.19 ₹1,205,037.32 ₹1,355,666.99 ₹1,506,296.65 ₹1,566,548.52 ₹1,656,926.32

Working (₹4,193.53) (₹4,822.56) (₹8,806.41) (₹11,986.51) (₹17,333.26) (₹20,967.65) (₹23,588.61) (₹26,209.56) (₹27,257.94) (₹28,830.52)
Capital
Inc. in Working (₹4,193.53) (₹629.03) (₹3,983.85) (₹3,180.09) (₹5,346.75) (₹3,634.39) (₹2,620.96) (₹2,620.96) (₹1,048.38) (₹1,572.57)
Capital
Operational ₹87,967.72 ₹202,325.77 ₹369,464.44 ₹502,882.16 ₹727,199.86 ₹879,677.25 ₹989,636.90 ₹1,099,596.56 ₹1,143,580.42 ₹1,209,556.21 ₹ 226,735
Expenses
EBIT ₹32,536.01 ₹74,832.82 ₹136,651.23 ₹185,997.51 ₹268,964.33 ₹325,360.08 ₹366,030.09 ₹406,700.10 ₹422,968.10 ₹447,370.11

Interest ₹2,768.00 ₹6,366.40 ₹9,964.80 ₹13,563.20 ₹17,161.60 ₹20,760.00 ₹20,760.00 ₹20,760.00 ₹20,760.00 ₹20,760.00
Expense
PBT ₹29,768.01 ₹68,466.42 ₹126,686.43 ₹172,434.31 ₹251,802.73 ₹304,600.08 ₹345,270.09 ₹385,940.10 ₹402,208.10 ₹426,610.11

Taxes ₹10,121.12 ₹23,278.58 ₹43,073.39 ₹58,627.67 ₹85,612.93 ₹103,564.03 ₹117,391.83 ₹131,219.63 ₹136,750.75 ₹145,047.44
PAT ₹0.00 ₹19,646.89 ₹45,187.84 ₹83,613.05 ₹113,806.65 ₹166,189.80 ₹201,036.05 ₹227,878.26 ₹254,720.46 ₹265,457.35 ₹281,562.67 ₹ 38,545.01

FCFF (₹40,000.00) (₹28,159.59) (₹6,183.13) ₹35,596.90 ₹64,986.74 ₹119,536.55 ₹204,670.44 ₹230,499.21 ₹257,341.42 ₹266,505.73 ₹283,135.24 ₹ 38,545.01

PV FCFF (₹40,000.00) (₹25,599.62) (₹5,110.03) ₹26,744.48 ₹44,386.82 ₹74,222.79 ₹115,531.13 ₹118,282.54 ₹120,051.67 ₹113,024.44 ₹109,160.89 ₹ 550,643

NPV ₹1,201,338

Exhibit 4 Estimated Cashflows for IHCL Midscale Hotel Venture

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