Tier-2&3 markets core growth area; focus on delivering a functional hotel, says Ajay Bakaya

These are interesting times for Sarovar Hotels. Its domestic and international expansion continues at a brisk pace, with a profound emphasis on secondary and tertiary markets in the domestic milieu. Ajay Bakaya, Managing Director, Sarovar Hotels detailed the road ahead for the company and shared his perspective on trends in the market in an exclusive interview. Excerpts:

Ajay Bakaya
Managing Director, Sarovar Hotels

An expansion spree in secondary and tertiary markets

Sarovar Hotels has been steadily notching up its inventory, especially in the tier-2 and tier-3 markets. More so, in 2018. It is slated to open hotels in Jaisalmer, Dehradun, Gorakhpur, Katra, Dahisar, Dibrugarh, Bodh Gaya and Jalandhar, among a few other cities, adding close to 800 rooms to its inventory 2018.  Ajay Bakaya backed the strategy, asserting that most tier-2 and 3 markets had “always exhibited high demand” and Sarovar Hotels had essentially aligned itself with the customer needs. “We have always focussed on what we have and those are a good bed, a good washroom, high-speed internet and a good meal. It is more than what a customer is looking for,” he reasoned. He suggested that a customer was not looking for a grand ballroom or a huge lobby and “the focus was on delivering a functional hotel.”

Africa and the Middle-east: new terrains for expansion

Apart from ramping up its presence in the domestic secondary and tertiary cities, the hotel company was also creating a sizeable footprint in Africa, Ajay Bakaya said. He shared that the foray was aimed at the “English speaking Africa.” “We started with east Africa as it was an English-speaking region. It was convenient,” he explained, adding that they were concentrating on areas with a sizable Indian diaspora and a certain understanding of India. “We are restricting ourselves to English speaking Africa also because of the benefit of available manpower,” he mentioned.

An artistic impression of Optus Sarovar Premiere Gurgaon

Sarovar was slated to open properties in Dar Es Salaam in Tanzania and Auxum in Ethiopia by the end of the year, we were informed. It is currently operating an all-suite hotel in Lusaka, the capital of Zambia.

There have been sustained talks of the possibility of Sarovar Hotels entering the middle-east market. It was a “natural transition” for Sarovar Hotels given the movement of people in both the direction, Ajay Bakaya said. When asked whether such a foray was imminent, he shared that the owners in the region were more inclined towards inking a lease relationship instead of a management contract.  “Management contract is simply not the flavour in the middle-east,” he said. He indicated that the hotel company was scouting for a “bigger break.”

Given the uptick in occupancy rates, an upswing in the business cycle was underway, however, it was not reflecting in the growth of room rates as “it used to during 2004-2008,” he noted. “The gap between demand and supply is not as wide as it used to be then,” he explained, noting that supply was exceeding the demand by 2 to 2.5 times. He added that rates were transparently available on the internet, further challenging the prospect of pushing the rates higher. He expressed hope that a better growth would happen eventually, sharing that the current room rate was growing annually at 5-6 per cent. 

“It has been like an absolute dream,” he exclaimed, describing life post the Louvre takeover (in a business restructuring last year, the European hospitality brand Louvre Hotels bought a majority stake in Sarovar Hotels). “Louvre Hotels wishes to develop the Sarovar brand and we have been going strong about it,” he said. He substantiated that the group had been delivering the numbers “it had envisaged.”

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