Prof.

P K Bansal
Professor & Head,
Marketing & Sales Department
Amity Business School
KADAVU RESORTS

Climbing up the steps from the boat jetty, Indranil Banerjee could hear the music drifting from the party that was
happening at the pool-side of his hotel. The company hosting the function was part of the regular corporate clientele
at the Kadavu resort hotel. Banerjee could also count a sizeable number of resident guests sitting around the
amphitheatre watching the Kalaripayatu show. Looking at the general crowd around the hotel, Banerjee couldn't
help thinking about the time when he joined the hotel as general manager just 5 months ago and things were not as
smooth as they are now. Yet the future for the hotel was still unclear and Banerjee had to decide whether he should
follow the current marketing strategy for the hotel or not.

Kadavu Resorts was set up in the year 2001 in the
then sleepy fishing village of Azhinhilam on the banks
of the river Chaliyar in the northern districts of the
state of Kerala. Designed to inculcate architectural
designs of the local maplah and Hindu culture,
Kadavu was intended to be a luxury resort cum-
business hotel with the distinct charm of the serene
Kerala landscape. Selected as one of the 50 must-see
destinations of a lifetime by National Geographic
Travel, Kerala was stated to be one of the 10
paradises of the world. With a catchy slogan of 'God's
own country', Kerala had managed to earn a place
for itself on the global tourism map. Yet a majority of
the international travel groups covered a circuit
between the cities of Trivandrum and Cochin, i.e. the
stretch between the southern tip and centre of the
state, with very few venturing out to the northern
districts of the state. The only tourism attraction that
was proposed to be developed in those parts was the
Bekal Fort area and even that would need a few years
time before it could have appreciable popularity.
In a tourism product, the destination plays the
most crucial part in the decision making process, and
the factors that govern the attractiveness of a
destination includes everything from the infrastruc-
ture of the area to the local culture and natural
scenery. Kozhikode had its share of resources which
made it a possible contender for larger tourist
inflows, but the rest of the factors necessary for
greater penetration of the huge tourist market was
yet untapped. Kadavu competed with two other
major city hotels, Raj Hotel and Royal Hotel for a
share of the tourist and business inflow into the city.
Kadavu – The River Bank
Banerjee believed that the most differentiating factor
of Kadavu Resort was its entrance. "The unique view
that one gets as one enters the lobe" is outstanding.
Spread over 10 acres of prime waterfront land, the
landscape using plants and trees, enhances the ethnic
feel of the entire resort. It is built from a special rust
stone indigenous to the Malabar region and the
architecture here harmoniously blends the Maplah
with the Hindu styles giving the resort an absolutely
unique appearance."
Kadavu is located 18 kms from Calicut international airport, Karipur; 150 kms from Nedumbassery airport,
Cochin; 15 kms from city center, Calicut; 14 kms from Calicut railway station;' and 366 kms from Bangalore via
Mysore and Bandipur National Park. It is situated on the tranquil banks of the Chaliyar-the largest backwaters
in Malabar. (Please refer Exhibit 1.1)

2.
3.

Exhibit 1.1 Tourism Map of Kerala

Karnatka

Lakshadweep Sea Tamil Nadu

Source: http://www.kerala-travel-tours.com

The hotel has 17 independent cottages and 57
elegantly styled rooms or suites. The rooms are
centrally air-conditioned with views that offer a
breathtaking blend of the crystal clear backwaters
surrounded by coconut plantations. Moreover the
lucid movements of the 'vallams' (local canoes) or
fishermen in their 'vanchis' (local fishing canoes) on
the backwaters provide a panoramic view.
Apart from all these, the hotel also provides an
Ayurvedic rejuvenation center offering traditional
Ayurveda therapies, amphitheatre with a daily
cultural programme, a coffee shop and a multi-
cuisine restaurant serving Malabar delicacies. It also
has one of the largest amoeba shaped swimming pools
in south India with a Jacuzzi and a separate
children's pool, a children's park and play area and a
tennis court. For meeting and banquet functions, the
hotel also has facilities like 'Chaliar'-the Conference
Hall, 'Thekkini'-the board room and 'panther'-the
banquet space and pool side lawns which can seat 20
to 1,200 people.
4.
Pricing Strategy
The pricing strategy followed is different for the local
market and outside Cali cut. The nature of this
service is that the business occurs in spurts, i.e.
demand variations are many. Hence it becomes
difficult to manage the workforce, making the pricing
of the service all the more difficult. As Kadavu is
targeted to the premium segment of the customers,
the pricing is almost double that of the market price.
It was designed to satisfy the ego and status symbol of
that segment of users. The logic behind such a pricing
is purely because they cannot compete with the brand
name of Raj, one of the competing hotels in the city
and part of a leading chain of hotels, and hence it
tries to use the perception that the costlier the place
the more prestigious it is. Besides, considering the
fact that Calicut had a small but significant
proportion of the population in a very high income
segment who had high aspiration values, this strategy
combined with the fact that the product offering was
superior to the one offered by Raj, provided Kadavu
with a distinct value proposition to its niche segment
of customers.
For the local market, they attempted to maintain a
sort of uniformity and price their service offering at
almost twice that of the nearest competitors. For
instance, a buffet which was priced at Rs125 plus tax
at Raj hotel cost Rs 225 plus tax at Kadavu. For
matters of room pricing also, it adopted the higher
price bracket. The net result was that the hotel's
average room revenue, calculated as total room
revenue divided by number of rooms sold, was sig-
nificantly higher than Raj, even after allowing for
trade discounts. Moreover, Kadavu saw itself as a
luxury resort, and hence adjusted its pricing with
various premium resorts in Cochin and Kumarakum
as competing resort destinations in Kerala. The
detailed comparisons of price and room tariffs are
given in Exhibit 1.2.
Sales Strategy
Distribution in a service environment essentially
refers to the network of sales agents that sell the
product across the country. Kadavu resorts initially
relied on a sole distributor in Bangalore, but then
later realised the futility of relying on an exclusive
relationship and thus spread out across the country
by hiring up to 12 agents in three cities-
Bangalore, Chennai and Mumbai. These agents were
provided with a base rate much below the published room
tariff, and they were free to hike up the charges to sell the
rooms at a competitive rate to their particular market.
They were called the most preferred agents as they usually
had the lowest rates for the resort at that particular
city/location. The other travel agents who booked the hotel
for their clients were paid a commission on a percentage of
the business they brought in. There· were plans to expand
the network of their most preferred agents by hiring more
agents in three other cities- Trivandrum, Cochin and
Coimbatore. In addition, Kadavu resorts made a conscious
decision to participate in all trade fairs, both domestic and
international, where they could meet wholesale buyers
directly and negotiate rates with them. This would also
give them an opportunity to build up their own database
of important customers and agents around the world along
with the obvious publicity and awareness that would be
generated about the hotel. A special provision was made in
the budgeted allocation for marketing and sales t~ account
for such expenditure.
Human Resource
One of the most important aspects in a service or-
ganisation, and especially one in a labour intensive
organisation such as hotels are to acquire good manpower.
The Kadavu resorts had its share of problems in acquiring
trained manpower. Even the almost inconsequential fact
that Kadavu is a strange name for people outside Kerala,
combined with the fact that Kozhikode seems distant and
remote was a difficulty in hiring talent from outside the
state. Indranil Banerjee was earlier with a large nation-
wide hotel chain, where as one of the youngest General
Managers of the company, he had established for himself a
reputation for turning around several loss making hotel
units into money spinning operations in the difficult
environment of a public sector enterprise. The new
assignment at Kadavu was a challenge for Banerjee to
grow an independently owned hotel to a reputable and
profitable organisation.
The hotel presently had about 110 employees of which
ten were in the management cadre. Most of them were
residents of nearby localities and were provided on-the-job
training to improve their skills
5.
and to develop a customer friendly attitude. Yet, due
to the lack of any formal training programme,
combined with the fact that most employees were
with little or no prior work experience, led to difficul-
ties in ensuring efficient service delivery at all times.
Moreover, one of the key difficulties in managing
human resource was in retaining staff. With attrition
·
rates very high, it becomes even more difficult in
maintaining the service quality standards. Because of
the seasonal nature of the business a small proportion
of the staffing requirements are handled by
contractual agreements with temporary staff.
Service Delivery Process
Unlike most traditional hotel structures which
followed match box design, wherein most service out-
lets and rooms are within a 30-40 meter radius of the
elevator or production area, Kadavu resorts adopted
a spread-out layout, wherein there was a series of
cottages along with a combination of rooms on the
main block. The coffee shop was built away from the
main building as were the convention hall and the
conference rooms. This design provided its own
problems in terms of providing quality service within
acceptable time limits. The service staff had to walk
several minutes from the main kitchen, up a flight of
stairs and negotiate small hillocks to provide room
service orders to guests on the cottages. To prevent
the inevitable customer complaints that would arise
due to the delays that may arise from such a long
process, Banerjee made efforts to discourage guests
from ordering from their rooms and instead coax
them to visit the restaurants and coffee shops. The
room service menus were deliberately made limited
so that guests who prefer more dining choices would
come down to the restaurants. The lavish buffet
spreads as well as the complimentary evening tea
were provided to tempt the resident guests to visit
restaurants. The tea/coffee makers and mini-bars
were provided in the rooms so that the most frequent
beverage orders could be avoided and the
accompanying pressure on the service system could
be relieved. The kitchenettes were provided even in
the cottages.
Local Environment
One of the peculiar challenges in a resort hotel is to
keep the guest occupied and busy as most of them
spend their time within the premises of the hotel, as
opposed to city hotels where guests leave in the
morning for business or leisure travel and come back
to the hotel by evening. This requires the hotel to
dream up activities to keep the guests happy as a
bored guest is one who would be an unhappy one and
one who would probably decide not to visit the hotel
again. Hence in an attempt to create a memorable
stay, the hotel organises various games and activities
such as boat riding in the day and cultural activities in
the evenings such as classical dance and martial arts
shows. Moreover, they provide facilities like a park
for kids as well as plans for acquiring video-arcade
games. A home theatre and a disco on demand
provides entertainment. A library is also proposed to
be built in order to relieve boredom. The menu
management was seriously looked into in order to
provide the authentic cuisine. An interactive kitchen
where guests also could try their hand in cooking their
own food was also planned.
Banerjee thought over the viability of the business
strategy they has been following. The hotel had a
turnover of Rs 1.8 crores the previous year and was
expected to make more than Rs 3.5 crores during the
current year. It had projected to earn about Rs 6-7
crores in revenues within the next Rs 2-3 years. On an
initial investment of 20 crores, the hotel was running
up a fixed cost of Rs 13-14 lakhs a month. Sixty
percent of the gross revenues were generated from the
rooms division and the remaining forty from the food
and beverage (F&B) division. In the F&B division, 85
per cent of revenues came from food sales and 15 per
cent from the bar. The traditional peak tourist season
that starts from the beginning of October till end
March was extended till end May in order to
accommodate the family vacation crowd. The period
between August 11 th and September 30th was
classified as mid-season where differential pricing
was applied. Out of the total revenue in a week, 70
per cent of the sales were generated from the
weekend extending from Friday till Sunday and
the rest 30 per cent from the rest of the week.
Managing the variability of demand through the week
as well as across the year was one of the challenges to
maximising"
6.

operational efficiency and profitability. Various amounts of non-paying 'visitors' to the hotel. The
packages (see exhibit) were floated to even out the local residents of Calicut took the hotel to be a sort of
demand and keep the hotel busy all the time. tourist attraction and came in droves just to spend
time in its scenic environs. Some even referred to it as
Banerjee faced some peculiar problems in his stint a 'park' and brought their picnic food along!
at Kadavu. Once when one of the boating tours took Ultimately, the hotel had to begin charging a cover
place at night, it accidentally tore apart the fishing charge of Rs 100 (redeemable against any purchases
nets placed by the local fishermen in the area, and the at the restaurant and bar) to all incoming visitors in
result was a mob of people demanding exorbitant order to dissuade the casual visitors who ended up
amounts of compensation from the hotel. The being a disturbance to genuine guests.
underlying dislike of the local people to the hotel
could be traced back to the time when the hotel was Walking into his office, Banerjee mulled over the
being built and the local population expected such a effectiveness of their current marketing strategy and
large project to provide permanent employment to its effect on the future prospects of the hotel.
many of the local residents. Unfortunately, when that
didn't materialise, the relations soured to the extent
that the hotel had to be extremely careful and
cautious in its approach, which meant that night time
cruises were stopped, so were loud parties at night
and general standards of environmental
responsibility were maintained. Another unusual
problem was the inflow of large

Exhibit: 1.2 Tariffs for Kadavu and Its Nearest Competitors

Tariffs for Raj Hotel

Room Type Double Room Luxury tax

Rs USD
Standard Foliage view 2900 65 15
Residency Foliage view 3300 75 15
Executive Suite Pool view 4000 90 15

Raj Hotel: All Kerala Holiday Package

Includes: Welcome Drink, Accommodation, and Buffet Breakfast, Complimentary use of Swimming
Pool, Gymnasium, Library, Table tennis and Activity center. All current taxes.

No. of Total Cost Rates for

Nights Extra Person Additional Inclusive
Single Double 5-12 Above 12 years
Room Room years

Standard 2 Rs 4750.00 800.00 1200.00 Welcome drink. Meal credit of

Room Rs. 1400.00 on double occupancy/
stay. One half-day sightseeing. One
complementary Ayurveda massage
per person once during the stay,
drink (house brand)/ person/day in
the bar, fresh fruit

Ayurveda 6 Rs 26250.00 Rs 38500.00
Packages
Tariffs Kadavu Resorts
Tariff from October 1, 2003 to March 31, 2004
(festival bonanza): Superior AC Room-Twin Occupancy
EP: Rs 3500; Superior AC Room-Twin Occupancy AP:
Rs 5280; Malabar Suite/Mappilla Pura Suite/Cottage-
Twin Occupancy EP: Rs 4000; Malabar Suite/Mappilla
Pura Suite/Cottage Twin Occupancy AP: As 5880.
Tariff from 1 st April to September (Monsoon Magic)
Superior AC Room- Twin Occupancy EP:
As 2450; Superior AC Room-Twin Occupancy AP: Rs
4080; Malabar Suite/Mappilla Pura Suite/ Cottage-Twin
Occupancy EP: Rs 2800; Malabar Suite/Mappilla Pura
Suite/Cottage-Twin Occupancy AP: Rs 4480.
1. Check in-12 noon & Check Out-11 AM All rates
are applicable for one night
2. AP rates include accommodation, bed tea,
breakfast, lunch, evening tea, dinner and taxes
3. Free accommodation for 2 children below 10yrs.
(without extra mattress). Food charges Rs 41 0
4. Extra child below 10 yrs Rs 910 and above 10 yrs
Rs 1110
5. Package starts with lunch and ends with breakfast
6. Service charges extra @30% on room service
7. For GIT minimum 10 rooms can be given @
Rs.1700/- all inclusive.
The New Year 2004 Special package: 2 nights 3 days
Superior Room: Rs 13900 USD 305
Suites & Cottages: Rs 14900 USD 325
Package includes pick up and drop from Feroke Railway
station/Calicut airport.
Welcome drink on arrival.
basket & cookies once during the stay and two bottles of
soft drinks and mineral water. 15% discount on F&B,
telecom and laundry. Day trip to Wayanad, sand banks
can be organised at an extra charge.
Accommodation, Ayurveda meals (Vegetarian breakfast,
lunch & dinner) treatment charges and taxes.
1. Fruit basket in room.
2. Morning tea/coffee, breakfast, lunch, evening tea/coffee
and dinner.
3. Half an hour boat cruise in River Chaliyar on sharing
basis, cultural evening (folk art of Malabar on January 1,
2004)
4. Souvenir (Kadavu's Gift)
5. As 300 gift voucher for Ayurveda massage.
6. All applicable taxes
"Packages Ho To Aisa" Offers two unbeatable packages
1. Unlimited hungama and 2. Family fun from October 1, 2003
to May 30, 2004
"Unlimited Hungama" A 3 days 2 nights package for one
couple: Superior Room Rs 16666; Suite or Cottage: Rs 17777.
Welcome drink, fruit platter & welcome cake in room.
Supplement for children below 10 years:
Rs 1800 without any extra bed. Supplementary charges for
extra adult sharing the same room:
Rs 3999. Inclusive of extra bed and all meals. No room service
is covered within the scheme. Bar services to be availed from
11 am to 11 pm. Boating and Ayurveda session lasts 30
minutes per session. Unlimited use of resorts recreational
facilities like table tennis, caroms, basketball, fishing, health
club and swimming pool. Extension of the package on pro rata
basis will be considered depending upon the room availability
position. Above rates not applicable for the period from 21 to
31 December, 2003.
"Family Fun" A 3 days 2 nights package for one couple:
Superior Room Rs 9900; Suite or Cottage Rs 10900.
Welcome drink, & fruit platter in room. Complimentary
boat cruise for 30 minutes (subject to weather conditions).
Rates includes accommodation, bed tea, breakfast, lunch,
evening tea and dinner. No extra charges and taxes.
Package starts with lunch and ends with breakfast. Free Free accommodation of two children below 10yrs without
accommodation for two children below 10 years. Meal extra mattress; Half hour boat cruise in river Chaliyar; All
supplement for children below 10 years-Rs 900 without applicable taxes; and Room for double occupancy...
any extra bed. Supplementary charges for extra adult
sharing the same room-Rs 1999 inclusive of extra bed
and all meals. Vouchers worth Rs 300 per couple to be Royal Hotel Tariff
redeemable at the Ayurveda centre for massages or Room Type
treatments. Complimentary use of resort's recreational
facilities like table tennis, caroms, tennis court, Standard Fortune Club Suites Extra Bed
basketball, fishing, health club and swimming pool.
Extension of the package on pro rata basis will be Single Rs.1200 Rs.1400 200
considered depending upon the room availability Double Rs.1400 Rs.1700 2000
position. Above rates not applicable for the period from
21 st to 31s1 December, 2003. 15% luxury tax is applicable on the room tariff. Other
taxes (if any) shall be extra.
2 Nights 3 Days Package: Superior AC Room:
Rs 7600; Malabar Suite/Mappilla Pura: Rs 8700. Children below 12 can be accommodated without an extra
bed in the same room free of charge.
3 Nights 4 Days Package: Superior AC Room:
Rs 9990; Malabar Suite Mappilia Pura: Rs 11500. Rates are inclusive of breakfast.

Welcome drink on arrival; All meals starting with Check out time is 12:00 Noon.
morning tea, breakfast, lunch, evening tea, dinner;

Exhibit: 1.3 Various Performance Parameters of Kadavu visa-a-vis Other

Competitors in the Month of Oct' 03

Kadavu Raj Hotel Royal Hotel

Occupancy (%) 60.41 82.40 50

ARR 1963 1374 906
Room Sale F&B 25.83 25.99 8.93
Sale Turnover 22.07 21.03 14.34
52 49.75 24.05