Tuesday, December 22, 2009

Low Cost Travel Market in India


We are planning to target the low cost travel market in India. We are planning to build and / or operate dormitories in small towns and cities across India. Initially such facilities would cater to Male traveler only. Facilities to accommodate families would be added later in large cites depending on the customer response and success of the business model.

The dormitories will offer facilities like clean toilets, bathrooms, luggage lockers, luggage / storage racks and beds at a nominal cost. Example of rates we are planning to charge is Rs 5 for use of toilets and bathrooms, Rs 10 for use of lockers to keep luggage for a day and Rs 20 for a bed to sleep overnight or rest during the day (and use the toilets and bathrooms next morning).

Target customer a male who is classified as poor and earning less than the minimum wage per month.

Current Situation
Indian cities are generally serve as a center of trading for villages and small towns situated around the city. Generally travelers come to the city in the morning and return to their villages in the evening. If they have to stay overnight, they arrange for accommodation with their relatives who stay in the city. Often a place to sleep during the night forms a deterrent for anyone travelling to cities when they don’t have any relatives. In major cities, people can be seen sleeping in railway platforms, waiting rooms in train stations and bus stations alongside their belongings.

There are hotels which offer rooms with attached bathrooms and toilets at rates as low as Rs 80 in cities. These hotels may charge more if only a few rooms are left, change their rates during peak seasons or in short they don’t have a fixed rate card. Availability of such hotels is not uniform across cities.

Clock rooms are present in railway stations which are in cities. These clock rooms mostly serve railway passengers and remain inaccessible to passengers not using railways as a mode of transport.

These dormitories would be located near to main transit points in cities and small towns. These dormitories would be advertised in local vernacular language newspapers, pamphlets distributed at / near bus stops and railway stations, direction signs etc. As far as possible a common design format would be followed for the front desk (reception area), direction signs and advertizing. Carefully designed signs would be strategically placed to attract target customers. Once the business picks up, new dormitories would be opened in locations where rent is cheap. Such new dormitories would rely on repeat customers who have used our dormitories in the same city or other cities. Near the reception area, there would be a board displaying locations of other dormitories in other cities.

Ideal Location
It would make business sense to take over public toilets and poorly run dormitories or empty space in bus stops and railway stations, modify with minimal investment and operate the service. We can bargain with the government agency to give us space at a lower rate (as we are doing public service by providing accommodation at lower rates). Problem of dealing with government bureaucracy.

Facilities in Dormitories
1. Structural changes have to be made to the site to accommodate Indian style toilets, bathrooms, washbasins and plumbing for water.
2. Toilets: Indian style toilets with place to keep luggage, hooks, bucket and mug.
3. Urinals
4. Bathrooms: Buckets, mugs
5. Beds: cheap metal beds with cotton mattress, cotton pillow. A washed set of bed sheet and pillow cover would be given along with each bed. A blanket may be given at additional cost of Rs 10. (Blanket cover would be washed, blankets may be washed once a month.) The size of the beds can be customized to increase the number of beds in a location. This can be done at a later stage when we can invest in design of the facility.
6. Washed towels can be hired on rent. Soap and tooth power would be on sale at the counter. Chains and locks can be hired to tie luggage to beds.
7. Storage racks for ranks.
8. Clean drinking water.

Design of Site
A workable design of the location has to done. Some properties of the design should be low maintenance, least plumbing modifications, appeal to target customers.
Low cost wall painting. The cheapest shade that’s available.
Fans. Energy saving lamps. Cheap curtains on windows.
Bathroom and toilet stalls can be erected by using plywood or plastic (syntax) type doors and partitions.

Entry Barrier for the Competition
The cost of the services proved by us would form an entry barrier. If a dormitory succeeds or is running, a few more may crop up nearby. These ones can be run by individual businessmen. We don’t foresee any big financially strong company coming in this business.

Economic Viability
Currently this model is not economically viable due to high cost of capital. A stand alone dormitory can be made but the cost of capital makes this unviable. (See attached excel sheet for cost calculations.)