Rahul Chaudhary
In recent months, we operated our hotels, some with 100% occupancy, with 50% staff. This proves we can manage with the current staffing level and it also helps the overall cost structure, while boosting GOP margins
While chatting with his batchmates last April, Rahul Chaudhary, MD, CG Corp Global learnt that the consensus amongst these well-placed professionals was that COVID-19 was in for the long haul. It was time to prepare for business continuity in difficult conditions, for at least a couple of years.
The very next day, Chaudhary decided to deep-dive into the cost structure of all its 140 properties across 12 countries. “Due to our large portfolio, I usually reviewed a hotel’s top line, major expenses, GOP, EBITDA and oveall returns. After our revenues went to zero overnight, I started combing through every line item of our fixed and variable costs diligently,” he revealed.
COST JUSTIFICATION
Following this introspection, the company started conducting zero based budgeting for every hotel. “We began looking at the yield per person, per square foot and per property,” Chaudhary added. After a closer look at fiscal outflow, revenue contribution, segmentation, cross streaming, source market, etc, he completely rehauled the cost structure. This much-needed self-cleansing process was a long time coming in the hospitality industry.
“In recent months, we operated our hotels, some with 100% occupancy, with 50% staff. This proves we can manage with the current staffing level and it also helps the overall cost structure, while boosting GOP margins,” he pointed out.
FLOURISHING IN ADVERSITY
This cost optimisation aside, CG Corp went all out with its expansion plans. It opened 15 hotels last year, despite the pandemic, and plans to launch another 16 properties this year. Chauhdary explained that the company could manage this since its business model focuses on the mid-market segment, which is perfectly suited for leisure travel, which has seen a surge.
“It is easier to restart these properties than a luxury hotel, because the cost involved is much lower. Moreover, developers and owners have become more value conscious and are willing to partner with mid-scale brands that ensure higher occupancies than upscale ones,” he elaborated, adding that almost 75% of the company’s properties were open throughout the pandemic.
The other quick move CG Corp Hospitality undertook was focusing on the domestic market, after international travel came to a standstill. Moreover, many properties, which earlier thrived on room rates started seeing more traction from F&B revenue.
Chaudhary’s strategy for the next few years will be to survive, revive and thrive. The in-depth analysis of every penny spent, and saved, will help in achieving this long-term goal.
