Software giant Infosys Technologies is all set to become India’s largest hospitality company this year. With plans for 15,000 rooms spread across its campuses in Bangalore, Hyderabad, Chennai, Pune, Bhubaneswar, Hyderabad, Mysore and Thiruvananthapuram, Infosys will emerge as the largest hospitality provider in India by June 2007, when measured by number of rooms it will offer.
By contrast, Indian Hotels, the company that runs the Taj chain of hotels, has 6,200 rooms across its 59 hotels. ITC Hotels, which runs the Sheraton chain of hotels in India, operates 77 hotels with about 6,000 rooms.
No, Infosys, India’s second-largest software company behind Tata Consulting Services, isn’t suddenly diversifying into hotels. At least, not right now.
Infosys, which calls its facilities ‘hostels’, is reacting to soaring hotel rates in the cities in which it operates, especially Bangalore, where hotels are often sold out even at $400 (Rs17,200) a night. India has a chronic shortage of mid-priced hotel rooms amid a sharp increase in domestic business travel and, during high season, across all hotels. Overseas visitors to India, for instance, rose by 13% last year.
“At a minimum saving of $100 a room for every day, we save significant money if you take into account that, on an average, 6,800 of our employees are travelling on work at any given point in time,” says Infosys director (human resources) T.V. Mohandas Pai. Currently, Infosys already has eight facilities operational with 3,711 rooms for its 69,000 employees.
A back-of-the-envelope calculation, assuming that the company’s monthly demand for hotel rooms is 34,000 (6,800 employees travelling five days a month within the country), shows that annual savings could work out to $40.8 million, or Rs176 crore, assuming they all stay in campus hotels.
It also suggests a very short pay-back period for any investments Infosys makes on such facilities, in addition to the hostels acting as ready-to-use “home offices” in the event of any disruption at office.
Conceding that not every company can afford to do this across so many cities and for so many employees, Pai says lack of hotel rooms could have an impact on growth plans for companies in India. “Policy makers need to understand that business travel is expensive and something must be done to make accommodation available at the right price,” says Pai.
Taj and Sheraton needn’t worry though. Infosys says it doesn’t view the rooms as a profit centre and doesn’t plan to use any spare capacity for outsiders other than its visitors. Not that Infosys needs that revenue stream. The company, which is widely recognized in India as an employer of choice in the world of high-tech, crossed $2 billion (Rs9,521 crore) in annual revenues last year and is extremely profitable at $555 million (Rs2,458 crore).
The rooms Infosys has are quite popular. Most Infosys employees stay in these company provided rooms, depending on the availability and the city from which they are working. Boarders often include chief mentor N.R.Narayana Murthy and CEO Nandan Nilekani, as well as the company’s board members when they convene for meetings in Bangalore.
No alcohol is served in Infosys hostels and the food is entirely vegetarian. The accommodation ranges from air-conditioned single rooms to suites with high-end flat-screen televisions sets.
While reserved for employees and guests, all rooms come with the services any hotel provides: laundry, room service, housekeeping, round-the-clock coffee shops, and wi-fi Internet connectivity. The first Infosys hostel came up in 2001 in Mysore, where the Infosys Leadership Institute, an employee training school, is located.
“We have benchmarked them (the hostels) to hotel industry standards,” says a company spokesperson.
The company’s in-house facilities department manages all the properties, including the food courts. So, is the company, which benefits significantly from outsourcing , ready to outsource its rooms since facilities management isn’t exactly a core competence?
“These are trained personnel and there is no need for an outside party to handle these operations,” says the Infosys spokesperson.
Depending on the services on offer and the location, the per-room capital cost involved in building a hotel in India ranges from Rs90 lakh to Rs1.20 crore, says Saurabh Gupta, senior associate, HVS International, a consulting firm that focuses on hospitality.
“This does not include the cost of the land, which varies depending on the city in which the property is based.”
Infosys has an advantage as its facilities are not considered hotels, which means it can build a hostel on its campus without having to deal with too many local zoning laws. The land for some of its campuses has also been provided by the government at subsidized rates.