Here's how Siesta cashed in on Indian hospitality market

Over the last few years, the Indian hospitality market has seen a rapid growth with both global hotel chains and Indian brands expanding operations. Besides, catering to the tourist traffic, service providers are checking for innovate models to cash in on the opportunity thrown up by the growth in business travel. Ashok Chattaraj started Siesta Hospitality in 2005 with the simple idea of customizing and managing corporate residences and today this Rs 100 crore company is redefining business stays.

36-year-old Ashok Chattaraj set up Siesta Hospitality in 2005 to provide business travelers customised solutions without blowing a hole in a company's expense account. What started as just a hospitality venture has today diversified into logistics with a launch of Siesta Logistics Corporation in 2007 and retail with the launch of Imprint Retail and Infrastructure in 2008. Growing over 400 percent for the first five years, Siesta has on board marquee client like JP Morgan and Standard Chartered.

The business model:

Ashok Chattaraj, Chairman & MD, Siesta Hospitality Services: Imagine a situation when the company is running its own guest house. There is an admin manager who would take the properties on lease, a procurement department to buy all the goods and a facilities department to manage it. So there are three sets of departments with the company managing it.

Here is a company who walks up in sales and say look, I am going to lease the property which you select. I am going to give you all furniture and fit house at a fraction lower cost than you will buy yourself because we buy in bulk. So our rates of procurement and hence capitalization is lower than what a company will buy and capitalise themselves. So you are getting a place exactly minus all the departments within your company. You are getting a lower capitalization of the product.

To avoid market volatility Siesta Hospitality signs long-term contracts between three-five years with most of its clients ensuring the steady cash flow. Ashok believes he can leverage with convenience and cost to convince corporates to opt for Siesta as opposed to setting up and running their own guest houses. Ashok's model seems to have a plenty of takers with Siesta clocking a turnover of Rs 100 crore in the last fiscal.

Managing and maintaining operations:

Chattaraj: Our costs are in three categories, the real estate cost to acquire the property where people are going to stay, the amortization cost which is opex from the capex that we have incurred and the opex is arrived by a kind of amortizing the capital expenditure towards the tenure of the contract and the third is the maintenance cost. It is any and every cost; be people costs, energy costs, entertainment costs, consumer. When you add these three, we add up our margins and that is our billing.

Today, Siesta Hospitality serves clients like Siemens Network, the UB Group, Coca Cola, Phillips, ITC, Bharti Airtel, Barclays, ICICI Bank and many more. Having raised USD 10 million from Matrix Partners in 2009, Siesta is present today in 26 cities and has even forayed into the international markets like Singapore and Hong Kong.

The way ahead:

Chattaraj: When we manage an operation of this order, there is a lot of learning, art and science that cumulatively has to be used. It can go into the choice of furniture so, depending on the size of the room; do you use single door, two-feet or four-feet width of a wardrobe or you use a 32-inch or a 26-inch of an LCD. So, these and the multiple other attributes that go in either creating a great place or maintaining a place in a fairly superlative manner is something that we specialize in doing. Hence, any and every corporate in the country should need our services.

So Ashok is gearing up to double his room inventory and his turnover by the end of the year. In a bid to address more customers, he launched Confluence, a work place managed by solutions which helps set up and manage office spaces. Confluence has helped clients to set up offices in DLF cyber city in Gurgaon and the plan is to enter Mumbai, Kolkata, Chennai and Bangalore within the next six months.

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