We cannot lose control of our pricing inventory, says Sudeep Jain

Sudeep Jain, vice-president, development, South West Asia at InterContinental Hotels Group, spoke to DNA Money about the challenges and changing dynamics facing the hospitality industry.

These are disruptive times for the hotel industry, Airbnb is eating away at global and local tourist consumers, and aggregators like OYO Rooms are targeting the budget end of the market. How is a hotel chain like yours protecting pricing?

We have a defence mechanism in place. For example, if you book a room through MakeMyTrip or one of the online travel agencies, you may not get your club points. But if you book through our website or any other channel like that, you'll get club points. You may not get free Wi-Fi. You may not get your bottles of water in the room. So booking online on a travel app and with us directly will give you differentiated service. We consider this fair from an economic standpoint. If you're paying a cheaper rate, for us it costs more to service that channel, because you're giving away commissions. I can't -- you're not the same customer. We want to control our pricing and not give it away to online aggregators.

There is obviously a pricing pressure on hotels as players like OYO are aggregating, and breadth of their offering is really large.

The biggest question and issue in today's world is who will control pricing. Also, we can't lose control of our own inventory. We can't allow that, the airline industry 30 years ago gave up their inventory and pricing, and suddenly the customer base was no longer loyal to the brand. I think we've learned from different places and industries. The pricing control will be important. I think one of the reasons why an OYO has not penetrated the higher end is their value proposition -- I'll give you a lot of options at relatively economic prices.

Is that a segmentation problem with OYO?

It's not just a segmentation, to me, it's their proposition. Today when I go -- open that app, I know I will get something cheap but consistent of a certain level of quality. Which is very different from a customer who's booking on Crowne Plaza. They know the price point and they're expecting a certain service level.

Does your lowest segment of the brand compete against OYO?

So today our lowest brand, or I say, our -- we don't have anything in the budget segment. We have something in the mid-tier segment, which is Holiday Inn Express. I still think the Holiday Inn Express pricing on average is probably fairly high compared to an average room at OYO. Our Holiday Inn Express, Gurgaon is between Rs 3,500 and Rs 4,000 a night.

And you would like to keep that differentiation between Holiday Inn Express and OYO consciously in the market?

I don't think we make our pricing decisions based on what OYO is doing, and then pricing it. Our pricing depends upon -- what the market can sustain, not necessarily up or down, right. We are not looking at should be 50% over OYO or 25% OYO. If anything today I think maybe the reverse where some of the hotels at OYO may be saying oh, this one is at X, so I think I should be at least 50% of X or 75% of X. That's my guess. I don't know how that works. I think where aggregators have been very successful is they have provided an option to unbranded hotels, right who may be small scale, smaller scale for a chain or an international chain to come in and service them. When someone associates with an IHG, Hyatt, Marriott or Hilton, there are some fixed costs attached to that, right. We have integrated global reservation system. I can see my inventory worldwide, right. Every room has a certain standard, especially related to fire and life safety, right. There has to be a sprinkler. There has to be a smoke detector with a certain level of audible noise. This is what our brands stand for – standardisation of quality. It's not easy for aggregators to replicate.