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ITC bets big on Fortune

Swaraj Baggonkar / Mumbai 11 Jul 12 | 12:07 AM

Multiple brands by hotel chains are passé – every big hotel chain has them to cater to the varying budgets of travellers. But India’s biggest hotel chain operator, ITC, has extended the concept further to create multiple sub-brands. Example: Fortune Park, its brand which caters to the mid-market to upscale segment of customers.

Though all the sub-brands are bunched together under the Fortune Park brand, they are distinct from each other serving guests having different affordability levels. ITC already had four sub-brands — Fortune Select, Fortune Park, Fortune Inn and Fortune Resort. A fifth was added to that list recently, with the conversion of the WelcomeHotel Sheraton Chola in Chennai, ITC’s first hotel property, to a new sub-brand called, My Fortune.

Impressed by the yearly average occupancy of around 60 per cent, ITC is now looking to expand in the Tier II and III cities for future expansion. It is in fact planning to open a Fortune hotel every 180 kms in several cities across India.

My Fortune also marks another key shift in the hotel chain’s strategy. So far, all Fortune Park properties were set up on management contracts as the company opted for an asset-light business model. But the Sheraton Chola property is owned by the company and ITC plans to set up another My Fortune property in Bangalore on land owned by the company. ITC, however, says it has not yet defined the route for the brand – whether owned or managed – and will take a call based on location.

Presently Fortune has 40 operating hotels while another four hotels are slated to be commissioned during this year. Another 23 properties are currently under various stages of development. The company plans to have 67 properties with aggregate room inventory of over 5,000, spread across 50 cities under the Fortune brand.

“The chain has extensive expansion plans and we are looking at being a 90 hotels-strong chain by 2015. Introduction of new sub-brands is a part of the overall growth strategy," says Suresh Kumar, Chief Executive Officer, Fortune Park Hotels, a full-owned subsidiary of ITC.

In addition to Fortune, ITC has the ITC Hotel - Luxury collection at the premium end, Welcome Hotel and Sheraton at the mid-scale segment and the Welcome Heritage, a collection heritage hotels including palaces and forts.

Kumar says the mid-market to upscale segment hotels are emerging as the biggest growth drivers in the industry that has traditionally been occupied by the 5 star and 5 star plus/luxury hotels. The Fortune brand operates across a wide spectrum of brand extensions, thereby creating specialised products designed to suit the specific needs of various segments, he adds. Essentially, Fortune hotels are as good as the five star properties but are much smaller in size than a typical 400-500 room luxury hotel.

The Fortune Select is the upscale hotel brand located at business locations in metros and mini metros. Fortune Park is a mid-scale business hotel, while Fortune Inn remains a full service business hotel with 30-50 rooms. Fortune Resort is a mid-market and upscale brand located at popular holiday and leisure destinations like Mussoorie, Port Blair and Ooty.

ITC says through Fortune, it is targeting the upper middle class population comprising both business and leisure travellers. Business travel, however, accounts for a majority of its revenue, though resorts do have a mix. The company believes the revenue per available room night (revpar), specially in the mid-market to upscale segment, would continue to grow at a healthy pace in the coming period.

“While the pricing is largely governed by the location and the availability of alternative accommodation in the respective areas, the mid-market segment is ready to cater to international and domestic traveller and the price points would range between Rs 3,500 to Rs 5,000, while the upscale segment would range between Rs 5,000 to Rs 7,500", adds Kumar.

ITC feels that the changed mindset of domestic tourists is creating a huge demand for hotels that provide quality at affordable rates. “Today, mini-metros, satellite towns and tier II cities in India are witnessing huge growth. Though the demand in these cities may not be the same as in the primary and secondary cities, it is growing by the day and presence in these cities is becoming critical for all hotel chains. That explains our increased focus on the domestic tourist segment," says Kumar.

The concept of mid-market hotels is relatively new to India and this segment of travellers is largely catered to by the unorganised sector. A very limited number of brands such as Gateway (from Taj Hotels), Ibis and Novotel (from Accor Hotels), Royal Orchid, Sarovar Hotels, Berggruen Hotels and Starwood Hotels occupy this space.

However, that is about to change as a large number of chains such as Marriott, Intercontinental Hotels Group, Bharat Hotels, Indian Hotels Company etc are setting up hotels in the mid-scale to upscale segment where room rates are between Rs 4,000-8,500.

“A majority of customers, who pay Rs 4,000-6,000 for these rooms are frequent foreign business travellers. These hotels find it easy to give them a taste of their services in India, so that when they go abroad their brand loyalty exists," an industry expert says.

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