Staying cash positive – that was the mission for Brigade Group’s hotels last year, and its team worked on multiple fronts to attain this. It reduced its fixed costs by 65% across the portfolio by becoming more efficient.
“Manning ratios declined, and multi-skilling increased. Every line item – be it food costs, repairs and maintenance expenses and even energy costs -were constantly reviewed,” revealed Nirupa Shankar, Executive Director, Brigade Group. “Our hotels utilised renewable energy sources and tried operating with a 100% load capacity on renewable energy on low occupancy days.”
During the pandemic, the team worked on property upkeep and maintenance along with health and hygiene measures to ensure the safety of guests and employees. Technology for digital access and high-quality air filtration was implemented to reassure guests. These efforts paid rich dividends as occupancies crossed pre- COVID levels. ARRs recovered by 70% of pre-COVID levels the past quarter, giving Shankar the confidence of a strong recovery for the coming year.
HIGHER, STRONGER, SMARTER
Building the value of its asset for the long term was in the crosshairs of Brigade Group’s strategies. It used to run an annual capital expenditure review process, but the pandemic required shifting to an emergency capital expenditure method. Here, all hotels were asked to avail only emergency expenses for areas requiring urgent attention. “Even our budgeting method was changed from an annual process to a quarterly one to manoeuvre through the prevailing uncertainty,” Shankar recalled.
As part of the revival strategy, the company ran active marketing campaigns highlighting its commitment to health. It re-connected with its distribution channels to provide innovative new guest offerings. These efforts helped it grow the demand base, and the teams were able to explore newer guest segments like marine and shipping groups, movie entertainment crews and sports teams across the portfolio. Venturing into these unexplored domains helped offset the shortfall from the traditional demand segments.
Brigade’s existing inventory comprises approximately 1500 keys across eight hotels. It also has two more hotels in an active stage of development with an inventory of around 300 keys. “The two hotels are planned in Mysuru, and Bengaluru and are in line to open by the end of 2023, taking our total inventory to around 1,800 keys,” Shankar added.
She pointed out that while developing a hotel, it is essential to build it resourcefully, within budget and timelines. It is vital not to overspend on the construction cost or over-design the asset to be financially viable. “During construction, there is typically a 5-7% increase in labor cost per annum apart from revisions in prices of concrete and other materials. Hence, the importance of building efficiently,” she elaborated.
