Philip Anugrah Raskita

29119207

MM5003 Marketing Management – Case Study Analysis

ORCHID ECOTEL:
LEVERAGING GREEN HOTELING AS CORE COMPETENCY

Basic facts:

 The Orchid, one of the vertical (out of 5) of Kamat Hotels India, is facing a trouble after
winning some award for the past few years.
 Vithal Kamat will conduct a meeting in one week for the presentation of the balance sheet
for the financial year 2008/09
 The Orchid was one of the five verticals of Kamat Hotels India Ltd.; its other four verticals
were VITS, LOTUS, Heritage property and the Kamat chain of restaurants
 The Orchid was known as one of the pioneers of the concept of ecoteling in India and had
used the ecotel effectively as its core competency to set itself apart from the competition in
the luxury hotel segment. It was Asia’s first and only ISO 14001 certified eco-friendly five-star
hotel and had won 23 international awards (see Exhibit 1) for building its core competency of
being an environmentally sustainable hotel.
 The company had nurtured the brand name “The Orchid” for the past decade and it had
become synonymous with the name of the company. Considering the brand value of The
Orchid, in the last board meeting Kamat and a group of shareholders had contemplated
changing the name of the company from Kamat Hotels India Ltd. to Orchid Hotels India Ltd.
 But by doing so, it will be hard for the company because each vertical has different value and
market segment then the others, on the other hand, ecologically sustainable services were a
well-accepted concept and had an assured customer demand.

CHALLENGE FOR SUSTAINABILITY: SCALE VERSUS VALUE

 A senior manager of one of the competitors commented: “If you promote eco-friendly
service as the only competitive advantage you can boast of, you will be serving a handful of
customers. There are business travellers, luxury seekers and short-term tourists who may not
be readily inclined to pay extra bucks for an eco-friendly room”
 The Orchid was the first hotel that moves toward eco-friendly concept

HOTEL INDUSTRY

 The hotel industry in India was divided into four segments. Each of the segments had a
specific focus on customers divided into categories of domestic, foreign, leisure travellers
and business tourists. The tourist flow of domestic and international traffic was seasonal in
nature, except to certain locations like Tier I metro cities5 where business tourists accounted
for a substantial number in the overall tourist traffic flow.
  The hotel and hospitality sector as a whole was cyclical in nature. The global economic
slowdown that began in September 2008 caused a reduction in corporate travel in both the
domestic and international segment in India (see Exhibit 3). The Mumbai terrorist attacks6 in
November 2008 added to the misery and the sector went into a dormant state. In the 2000s,
the growth in tourist arrivals (see Exhibit 4) had declined due to the sharp economic
downturn in the United States and Britain, whose citizens made up a large portion of the
nearly five million tourists arriving in India in 2008.
 As we can see from exhibit 3, from March 2008 to March 2009, there are significant drop in
PAT growth around 79% and from exhibit 4, foreign tourist dropping from 2008 to 2009 by
3.3%.
 Analysts predicted that the number of branded hotels in India would double between 2009-
2012, while global hotel chains would add approximately 300 hotels by that time, showing
an annual growth rate of 15 per cent per year. Another report published by Tourism Satellite
Accounting and released by World Travel and Tourism Council (WTTC) highlighted similar
findings (see Exhibit 5).

MARKETING STRATEGY
 The Orchid is a green hotel, taking care of every little detail in order to do so, right from brick
to paper. The Orchid is positioned as a five-star hotel which redefining luxury in an
environmental context.
 This strategy of marketing The Orchid as a green hotel was based on the fact that 87 per cent
of international travellers patronized green hotels.

OTHER BUSINESS VERTICAL

 Kamat Hotels (India) Ltd. had been running four other verticals in the form of companies it
owned as well as a subsidiary company (see Exhibit 11). These verticals catered to different
customer segments and different service offerings right from the four-star hotel (VITS) to the
restaurant chain (Vithal Kamat’s restaurant)
 According to market research, in cities such as Bangalore, Pune, Mumbai and Hyderabad
with booming information technology, biotech and outsourcing businesses, the average
room revenue (ARR) was soaring and was usually between US $132 and US $232. The ARR,
which was expected to touch US $275. According to industry experts, with the introduction
and addition of new lowcost carriers linking metros with Tier I and Tier II cities, the
frequency of travel had increased but the duration of stay had reduced significantly, thus
creating a need for budget rooms. The research indicated the need for the introduction of
budget hotels rather than additional capacity in premium and luxury hotels

PROS AND CONS PROVIDING ECOTEL SERVICE

  Pros
o Enabled to leverage this competency in their other verticals
o Well-accepted concept and assured customer demand with 87% of foreigners
preferring green hotels
 Cons
o High capital investment needed for basic infrastructure and maintenance
o Other verticals have own strategy and catered to different types of customers
o Competitors like Hyatt, Oberoi, Taj, etc promoted luxury and consumption
experience

SUGGETIONS

 Selectively change some of the verticals to eco-friendly concept, especially VITS, since they
already are a high-class hotel and might be able to adapt to this concept easier because VITS
might have less issue on capital investment.
 For other branch, I think it would be better to keep them at it is or change the concept of
Heritage Hotel to a budget hotel to take the advantage of growing demand of budget hotels.