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C AS E 4 Ginger: Smart BasicsTM Dr Mukta Kamplikar1 Roots Corporation Limited develops and operates a fast-expanding chain of economy hotels across India under the “Ginger” brand. There is currently a lack of competition in the branded economy hotels segment and Ginger is the only branded economy hotel chain in India. The Ginger hotels are built around a concept that provides facilities to meet the key needs of today’s traveler, at affordable rates.

Ginger faces challenges in different aspects of its business as it aims to deliver consistently, quality service to the customer and manage customer expectations. COMPANY BACKGROUND Exhibit 1: The proportion of hotel segments across Indian cities. Jaipur Cochin Goa Pune Hyderabad Bangalore Chennai Kolkata Mumbai Delhi/National Capital Region Budget Mid-market First class Lurxury R oots Corporation Limited (RCL) is a wholly-owned subsidiary of The Indian Hotels Company Limited (IHCL). IHCL is a part of the Tata Group of companies (see www. tata. om), India’s premier business house. Taj Hotels Resorts and Palaces comprises 77 hotels, 7 palaces, 6 private islands and 12 resorts in 40 locations across India with an additional 18 international hotels in the Maldives, Mauritius, Malaysia, Australia, UK, US, Bhutan, Sri Lanka, Africa, and the Middle East. Incorporated on 24 December 2003, Roots Corporation Limited operates the ? rst-of-its-kind category of Smart Basics™ hotels across India. Launched in June 2004, the Smart Basics™ concept created a revolution in the world of Indian hospitality.

Roots Corporation Limited develops and operates a fast-expanding chain of economy hotels across India under the “Ginger” brand. The company either owns/ leases land on which it develops and operates hotels and has now started entering into joint developments where the owner brings in the land and bare shell and leases the same to the company. The company’s recent growth has been organic, through developing and operating hotels in new cities or by going for additional hotels in existing markets; thus expanding the geographic reach of the hotel chain.

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The company intends to develop and operate additional hotels under both business models to maintain or achieve a dominant position in every market covered by their Ginger hotel chain. The Economy Segment Historically, hotel development projects in India generally focused on upscale hotels that were primarily targeted at international tourists and corporate travelers. New hotels will be concentrated in 18 main cities over the next 10 years, as shown in the following chart. Exhibit 2: Projected hotel expansion rate over 10 years. 60 50 Number of hotels 40 30 20 10 0

De lhi N Mu CR Ba mba n Hy galo i de re rab ad P Ch une en n Ja ai ipu r G Ko oa lka Vis t akh Ko a ap chi Ah atn em am da b Ud ad aip u A r Lud gra h Luc iana kn M ow Co yso imb re ato re Source: HVS International. 446 Case Study Between 2007 and 2010, supply will increase in all categories of hotels, as shown in the chart below. Exhibit 3: Projected supply increase in all categories of hotel. Increase over Five Year Development of Supply Mid-market First Class Proposed Supply Existing Supply Budget Luxury a? liations as opposed to Ginger hotels, which are part of a network of hotels).

Going forward we see competition continuing from the unorganized section of the market as well as from newer international and local hotel companies who have announced their intent to set-up hotels across the country in the value segment. The market is witnessing a fair amount of activity in this segment of the hotel market. Some of the companies who have announced plans to establish a presence in the country are shown in Exhibit 4. Exhibit 4: Lodging brands venturing into India. Brand Formule 1 Promoters Plans Agra Ahmedabad Bangalore Chennai Delhi (NCR) Goa Hyperabad Jaipur Kolkata Mumbai Other Cities ,336 519 1,906 2,075 7,030 2,252 1,442 1,298 1,354 7,402 8,056 384 462 7,794 4,407 28. 7% 89. 0% 408. 9% 212. 4% 69% 48% 55% 36% 74% 18% 57% 42 61% 36% 47% 31. 1% 28. 0% 24. 8% 12. 4% 25. 4% 11. 7% 11. 2% 30. 8% 3. 9% 32. 5% 16. 7% 38. 0% 27. 0% 43. 6% 34. 4% 36. 3% 29. 4% 28. 9% 18. 6% 37. 5% 15. 6% 37. 0% 23. 1% 38. 2% 25. 6% 21. 3% 26. 0% 49. 7% 26. 7% 24. 0% 62. 5% 51. 9% 14. 2% 10. 9% 10. 0% 18. 4% 18. 8% 26. 0% 9. 7% 13. 6% 53. 5% 10,856 154. 4% 2,632 7,408 2,770 2,465 9,318 6,870 116. 9% 513. 7% 213. 4% 182. 1% 125. 9% 85. 3%

Accor in a 100 hotels in the next decade joint venture with Emaar MGF Isthitmar, Dubai New look pod hotels Easy Hotels Sleep Inn Source: HVS International. Choice 10 hotels by 2010; ? rst hotels Hotels with to be in Tirupati and Vizag Gupta Group Air Asia, Malaysia Lemon Tree partnered by Warburg Pincus First hotel to be in Goa 10 hotels by 2010 While growth is expected in the upscale hotels, the growth in the economy segment is still minimal. While several chains, both domestic and international, have announced plans for development of hotels in this segment, visible action on the ground is limited.

Economy hotel chains in India mainly target value-conscious domestic business and leisure travelers who demand convenient lodging, a consistent product and high-quality services. According to a study conducted by Ginger, currently, 37 percent of economy hotel guests are individual business travelers, 23 percent are contract corporate customers and 20 percent are individual leisure travelers. Economy hotel chains aim to satisfy customers’ basic accommodation needs with a? ordable pricing, a comfortable lodging experience and a standardized service-product.

Lack of competition in the branded economy hotels segment is a great opportunity for Ginger. Tune Hotels Red Fox Peppermint Royal Orchid 50 hotels by 2010; bids for 11 Hotels hotels on Railway land are held up; ? rst hotel open in Hyderabad Kamat Hotels 50 hotels in the next ? ve years; focused on West coast; tie-up with ONGC /MRPL Wyndham with Gammon 38 hotels by 2011 Kamfotel Days Inn / Super 8 Premier Travel Inn Whitbread 80 hotels in 10 years in a joint venture with Emaar MGF Landmark 20 hotels by 2009 Group, Dubai DIC Starwood No numbers mentioned No numbers mentioned City Max Hotels Travelodge

COMPETITION The lodging industry in India is highly fragmented and competitive, and competition is expected to persist and intensify. Currently, Ginger competes with three-star full-service hotels from the unorganized sector (these are hotels developed and operated as standalone hotels with no chain/hotel group Campanile While some developments have started in the mid-market segment with Lemon Tree Hotels, Ibis (Accor), Keys (Bergruen Hotels), Day Hotels (Dawnay Day), Hometel (Sarovar Group), Hilton Garden Inn Hotels (DLF) and Taj Gateway Hotels, not much activity is visible at the economy end of the spectrum.

This is possibly on account of the high prices of real estate. Ginger: Smart BasicsTM 447 CASE STUDY Ginger—The Service Concept The concept of Ginger was developed in association with renowned corporate strategy thinker, Dr C. K. Prahalad, and the hotels were indigenously designed and developed by the Indian Hotels Company Limited. The Ginger hotels are built around a concept that provides facilities to meet the key needs of today’s traveler, at a? ordable rates. Smart Basics™ is a philosophy of providing intelligent, thoughtout facilities and services at a ‘value’ pricing and re? cts the new spirit in which people live and work today. It signi? es the emerging lifestyle which is visible in the degree to which individuals have taken control of their various activities viz. the use of e-mail instead of letters, as also the use of mobile phones, conference calls and video conferences to get things done quickly and e? ciently. Essentially, it is simplicity and convenience in ease of doing business (awareness, booking channels, payment gateways); informality, style, warmth and modernity in its approach to product design, service philosophy and a? rdability in pricing. The ? rst of the Smart Basics™ hotel was launched in Bangalore and was called indiOne. When the test marketing of the concept was completed, there were slight changes to improve the hotel facilities and services. After that, the Smart BasicsTM concept was rolled out across India. This category of hotels was launched with a new name, Ginger hotels, in line with the fresh, simple yet stylish and warm world of Smart Basics™. An up-and-coming category of hotels, Ginger de? nitely signi? es simplicity, convenience, informality, style, warmth, modernity and a? rdability. The target segment for Ginger is the large growing middle class with increasing disposable incomes. They are the class of travelers who would spend on travel but not on luxury accommodations. These travelers look for value-for-money accommodation that is clean and secure and also include international travelers looking for hygienic accommodation in the smaller cities. Ginger is the only branded economy hotel chain in India with a nationwide network of 12 hotels, with an additional 20 hotels under development as of 31 May, 2008.

Their early-mover status in many markets and established regional operational synergy has enabled Ginger to develop and operate hotels e? ciently and successfully in targeted markets. As the only branded economy hotel chain in India, the chain has been able to establish credibility with property owners and secure desirable properties on favorable lease terms. The economy segment (3-star) is better protected against and more resilient to the volatility in the hospitality segment as compared to the upscale segment. THE OFFERING—SMART BASICS™

Ginger hotels designed their facilities and services to include The Square Meal™—a multi-cuisine restaurant, on-site cyber cafe, a meeting room (that seats 10 people), laundry facility (same day delivery), on-site ATM, a Gymnasium, secure parking and Doctor-on-call. Ginger lays special emphasis on environmental and ecological issues through the use of compact ? uorescent lights (CFL), well utilized natural lighting, auto-time management for air-conditioning and energy-e? cient hydro-pneumatic systems. Ginger provides ingle rooms for the lone traveler; twin rooms with separate beds for those who travel together; double rooms with a queen-size bed; and special rooms for the speci? c needs of the physically challenged. The rooms are packed with electronic locking systems, cable TV, Internet connectivity, a mini fridge, tea/co? ee makers, self controlled air-conditioners, an ergonomic work area, and a 17-inch ? at screen TV. Each room has branded toiletries, 24-hour hot and cold running water, a shower area, and bath and hand towels. Exhibit 5: Smart BasicsTM amenities. 48 Case Study Exhibit 6: Innovative promotion — A life-size model created for a campaign that is carried to metros across India. Ginger operates predominantly in a large geography of nonmetros with uncontested market opportunity. Exhibit 7: The Ginger Development Map To ensure safety, Ginger is equipped with 24-hour security, closed-circuit TV to maintain records of all visitors, swipe card locks and digital safes located at a Give ‘n’ Take™ counter at the lobby. In addition, it has supporting infrastructural facilities including administrative o? es, kitchens, housekeeping, HVAC facilities, diesel generators for emergency power supply, water treatment plant, sewage treatment plant, etc. Ginger has outsourced food and beverage to partners operating on a revenue-share model, which includes Cafe Co? ee Day in selected properties. Ginger also o? ers other facilities like “SMART Wellness”, which is an Ayurvedic wellness facility for business travelers at a low cost. This has been developed with Arya Vaidya Pharmacy at all businesscum-leisure locations.

Ginger has introduced “SMART Sleep,” which includes a posture-pedic mattress for absorbing and redistributing pressure from the body weight, a tropical duvet and an anti-allergy pillow. The company has also introduced selfoperated vending machines that accept Indian currency for customer’s convenience. The company is now developing a “SMART Shower”. The organization believes that a customer’s sleep and bath are his most important needs at their hotels. Going forward, Ginger plans to develop its own range of merchandise that will be o? ered in its hotels and on its website.

The merchandise is to include their bath collection, bedding collection, furnishings and decor, apparel, accessories, travel accessories and etc. Ginger intends to increase their revenue per available room by adopting a ? exible pricing approach/policy, which will be linked to the occupancy levels in the individual hotels. EMPLOYEES AND TRAINING Ginger believes that their ability to attract good talent, train and retain employees is critical for their growth strategy, as people are critical to maintaining the quality and consistency of their services, and thereby their brand and reputation.

The business model of Ginger uses a fair amount of outsourcing. Only about 10 managers per hotel are on the payrolls of Ginger, while all other facilities like kitchen, restaurant, backend maintenance, are outsourced. Ginger has a total of about 175 permanent employees. Since housekeeping and food and beverage are outsourced operations, these employees are on the vendors’ payrolls. Ginger tries to leverage on hotel management schools to develop a management talent pool with su? cient capacity to meet the demands presented by their rapid growth.

The company aims to recruit, train and retain the best talent through a multi-step recruiting and training process, and career advancement opportunities. Ginger has implemented extensive training programs and periodic tests for managerial and other hotel-based sta? primarily through training partners. New unit managers of the hotels are required to undergo a two-month training, during which they receive training in managing all core aspects of the hotel operations, as well as the company culture and philosophy. Ginger: Smart BasicsTM 449

In addition to training, Ginger has implemented periodic web-based tests to assess the relevant knowledge and skills of their managerial and other employees. The company uses performance-linked compensation structure, careeroriented training and career advancement opportunities as key drivers to motivate its employees. Ginger’s challenge is also to ensure that the outsourced partner delivers up to the service standards that was agreed upon. To be able to create/modify the outsourced partner’s systems and processes to its needs in order to deliver consistent good quality of service to the customer is critical.

Since each person in the system is working towards the same goal of delighting the customer, there are few di? erences in terms of the employee pro? les between employees of the outsourced partner and the employees on the payrolls of Ginger. It is important to ensure that the people working for the outsourced partner see themselves as a part of the same team. It is also important that the outsourced partner sees the advantages in following the policies, processes and systems of Ginger. Ginger operates in a large geography of smaller cities where the pro? es of employees in terms of their exposure to technology, comfort with modern amenities, etc. are di? erent from that of a metropolitan city. The challenge therefore lies in getting these employees to perform up to expectations. To design systems to recruit the right kind of people and provide the right kind of training to employees is a challenge for Ginger because, while the developmental inputs do not need to be the same across unit locations, the output in terms of consistent service to ful? ll customer needs has to be fairly identical. Additionally, acquiring professionally quali? d employees locally (in remote areas and non-metro cities) and retaining talent at those locations is an area of concern. In their endeavor to retain talent, Ginger makes e? orts to ensure that employees see additional value in non-monetary rewards like developing employees competencies by making this visible to their employees through certi? cations, etc. But to be able to consistently ensure this across locations remains a challenge. If there is attrition, to be able to train and retrain employees (since the numbers are very small) at remote locations becomes very di? ult. Ginger’s people challenges are thus attracting talent and keeping them continuously motivated, given the vast opportunities for most of their young talent. Ginger training head, Bhanot, says: “We are cost conscious and so we need to use unconventional methods of recruitment because conventional methods like placement agencies turn out to be very expensive. We recruit through Careers@Ginger, our recruitment portal, and about 48 percent of recruitment happens through this site. The rest of the recruitment is through referral programmes (with rewards for referring).

These methods have been successful. We also build relationships with business schools and our employees go to colleges and partner with them by linking with their syllabi, calling students for get-togethers, using students as summer interns; instead of going once in a year like most companies do. We try to build relationships before the recruitment even starts. We also try to address the challenge of keeping our young sta? motivated by giving them opportunities to learn and grow by continuously upgrading their skills.

We are a budget hotel and we have chosen e-learning initiatives to cut costs. We have in-house training, induction, training operations and e-learning modules (based on customer feedback systems) and program content is created internally. ” CENTRALIZED HOTEL MANAGEMENT Personnel at corporate o? ce perform strategic planning, ? nance, project development, sales and marketing, training and other functions and guide, support and monitor the on-site hotel operations and executives. The key elements of Ginger’s centralized hotel management program are: Budgeting and Monitoring

The annual budget is based on historical operating performance of the hotel, planned targeted marketing, planned renovations, operational e? ciencies and local market conditions. Quality Assurance and Training–Quality standards These have been de? ned for all aspects of hotel operations, covering housekeeping and hotel maintenance, as well as ensuring compliance with these quality standards. A set of procedural manuals have been created and employees are trained to ensure the e? ectiveness and uniformity through 450 Case Study the human resources department at our corporate o? e as well as through outsourced training vendors. The compliance with quality standards is monitored through both scheduled and unannounced visits and reviews conducted periodically at each hotel. Employees are required take periodic tests (including e-certi? cation) in order to monitor compliance with quality standards. In addition, the practice of mystery audits and tracking customer comments through guest comment cards, and the direct solicitation of guest opinions regarding speci? c items, allows Ginger to improve services and amenities at each hotel across the chain.

To maintain a competitive edge and enhance their hotels’ appeal the company requires each hotel to allocate a ? xed percentage of their revenue for periodic renovation and replacement of furnishings and equipment to maintain the quality and standards of its facilities. Ginger has implemented a centralized procurement system (where possible, along with the parent company, IHCL) to obtain the best pricing available for the quality of goods sourced to the hotels and to minimize the operating expenses. Ginger supports local sales e? rts of each of its hotels along with corporate o? ce sales executives who develop and implement new marketing programs, and monitor and respond to speci? c market needs and preferences. • • • • Large travel agencies and smaller travel agents. Call Center—Ginger currently has a call center which can be reached through a toll-free number. Travel portals and other travel related websites. Distribution partners—Partners like BPCL, which is currently rolling out Travel Desks in various BPCL petrol pumps across the country, is also used as a channel for distribution.

Access to these channels enhances occupancy rates of the units (hotels) on a day-to-day basis. The Ginger brand, trade names, trademarks, trade secrets and other intellectual properties are used to distinguish and protect their technology platforms, services and products from those of their competitors. This also contribute to their competitive advantage in the economy-hotel segment of the lodging industry in India. These intellectual properties are currently owned by the parent company, Indian Hotels Company Limited.

To protect the Ginger brand and other intellectual properties, they rely on laws governing trademarks, trade secrets and copyrights as well as imposing con? dentiality obligations on their employees, contractors and others. Ginger has registered trademarks in India, including “ ” and a registered domain name viz. www. gingerhotels. com. Ginger’s corporate marketing and advertising programs are designed to enhance consumer awareness and preference for the Ginger brand—which is to o? r the best value, convenience and comfort in the economy hotel segment of the Indian lodging industry; and to encourage customers’ use of their centralized reservation system. Marketing and advertising e? orts include outdoor advertisements, distribution of ? yers and other marketing collateral on their hotel properties, television, Internet, radio advertising, print advertising in consumer media, promotional events, special holiday promotions and joint promotional activities.

In reshaping customers’ expectations to make the brand endearing, Ginger does not provide room service, valet and concierge, and communicates the message “Please help yourselves” through its advertisements. The advertisements convey that since none of the above facilities are provided by the hotel, the customer saves on tips. However, there is clearly an expectation-perception gap as the Indian customer is still uncomfortable with the concept of Smart BasicsTM. They grapple with “there was nobody to receive me,” “nobody gave me water in the room,” “I called 7 times and

MARKETING GINGER Ginger’s core targeted customers consist of corporate customers, value-oriented individual SME business travelers and leisure travelers seeking comfortable and convenient lodging at an a? ordable price. Ginger reviews hotel pricing twice a year and typically adjust room rates annually based on the local market conditions of the city and the speci? c location of each hotel. The corporate o? ce team and the city and hotel managers jointly develop tailored marketing plans to drive sales for each hotel and in each city.

Ginger operates in a large geography of non-metropolitan cities like Agartala, Nashik, Bhubhaneshwar and Durgapur where pro? les of customer in terms of their exposure to technology, comfort with modern amenities, etc. are di? erent. The challenge therefore lies in customer responses to these. Ginger is currently using the following distribution channels which includes online media. • Website—Internet Booking Engine hosted on the Ginger website is one of the main channels used for making the bookings. Ginger: Smart BasicsTM 51 the room boy did not turn up. ” Ginger sees many customers each day who enter the hotel not knowing what to expect. The many complaints on the websites and complaints registered across the counters at the hotels have to do with services Ginger does not provide (by design) rather than dissatisfactions caused by Ginger’s service. Creating awareness for the Ginger brand at this point in time is a challenge, and since the business model does not allow huge expenditure on media, innovative promotion is needed.

Ginger made quirky use of outdoor media by materializing the idea of using a life-size 3-dimensional hoarding of some parts of the hotel, including getting someone to live in it. This was taken across a couple of metros for promotion and received extensive coverage in the electronic media. Ginger needs to ensure their customers come in recognizing and knowing what they should be expecting from the hotel. The challenge is not only in communication through advertisements, but also to communicate it clearly when a customer checks in. Ginger’s ability to communicate clearly what the customer can expect is an area of concern.

This is because there is a tendency not to explain either because the customer does not have the patience to listen or there is a fear of losing this customer. Ginger has been trying to plug this by educating the customer before he/she checks in by having commercials playing in the hotel, training front line managers to give clear messages to the customer as to what Ginger can deliver, and communicating this through advertising. STUDY QUESTIONS 1. 2. 3. 4. What is Ginger’s service concept? Use the Flower of Service to aid you in your answer. How does Ginger create customer value?

How can Ginger manage customer expectations more e? ectively? Evaluate Ginger’s brand positioning and communications strategy. Given that the number of players in the budget hotels market is increasing, how can Ginger sustain its unique positioning? Ginger faces challenges relating to people. How can they overcome these challenges? What are the key challenges in the way to service excellence for Ginger? Give recommendations to Ginger to overcome these challenges? 5. 6. 1 © 2009 Dr Mukta Kampllikar, Senior Practice Consultant, Tata Management Training Center, Pune, India. 452 Case Study

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