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Tata Group Restructuring Budget Hotel Brand Ginger in India

By Lijee Philip & Kala Vijayraghavan, The Economic Times, IndiaMcClatchy-Tribune Regional News

Jul. 16, 2009--MUMBAI, India -- The Tata group is restructuring its budget hotel brand Ginger by divesting unviable properties and adopting a flexible pricing strategy for the brand, in contrast to its earlier policy of keeping room rates fixed, said a person familiar with the development.

Roots, the wholly-owned subsidiary of the group's hospitality arm Indian Hotels -- which runs the Ginger brand of hotels -- has sold properties in Agartala and Durgapur.

With occupancies falling drastically in some of the markets, margins have been under pressure, thus forcing the group to exit unviable properties. Also, the Tata group is actively looking at launching the brand in global markets.

The person said Roots is talking to PE funds to raise money to finance its overseas growth plan. Roots may raise $75-100 million to expand its operations in the Middle East and south-east Asian markets, he said.

Ginger had a fixed pricing strategy of Rs 1,000 per room earlier, which hurt profit margins a year back when real estate rentals and property prices hit the roof. Officials said a variable pricing strategy would keep a control over costs.

Ginger's room rates have been hiked by 5-10 percent in recent months depending on the demand-supply scenario in a particular market. "The Tatas are restructuring the company, divesting some of its unviable properties and growing in and out of India," said another person close to the group.

When contacted, Prabhat Pani, CEO & director of Roots, declined to comment on the restructuring move. "The pricing at Ginger is based upon multiple factors, but we ensure that the customer continues to get great value, which has been the proposition at Ginger since its launch. We believe that the Ginger value proposition can be made even stronger by optimising our footprint to include specific markets and locations where our customers travel to. Ginger Hotels currently operates 19 hotels across geographies in India and is fully committed to increasing this number to 30 by December, 2010," he said.

Ginger faces competition from budget players like Formule1 and Red Fox, and mid-market brands such as Ibis and Premier Inn. Launched in June 2004, Ginger started off with Rs 1,000 fixed room rate, which was later revised upwards when real estate prices went up drastically between 2005 and mid-2008.

Some of its properties in non-metro markets charge rates closer to three-star hotels, said industry sources. Ginger has started increasing its focus on metros and tier II cities, and currently has 14 hotels across the country.


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