Making room for success

Patu Keswani, 48 Education: B.Tech, IIT Delhi; PGDBM, IIM Kolkata Previous work experience: Taj Group of Hotels; AT Kearney Last salary: Rs 1.5 crore a year Time spent as an employee: 19 years Age at starting business: 42 years No of years as entrepreneur: 6 years Initial investment: Rs 7.5 crore Source of funding: Personal savings and loans/investment from friends and family Company: Krizm Hotels Pvt Ltd Turnover: Rs 107 crore (expected for 2008-9) No of employees: 1,200

Groomed in hospitality:
It’s supposed to be a lemon tree. But given its fruition in the past six years, it may well be the fabled beanstalk. Curioser is the fact that the man nurturing it has no green thumb. However, 48-year-old Patu Keswani, doesn’t see any incongruity in the fact that his Rs 60 crore Lemon Tree Group of Hotels has flourished despite his lack of a business background. The Chairman and MD of a chain of five boutique hotels explains it with a disarmingly simple logic: “All you need to succeed is passion, a realistic idea, ability to take risk and a strong belief in your capabilities.” “I had never thought of setting up a business. I just went with the flow,” says Keswani, an alumnus of St. Columbus School, Delhi, who went on to complete the elite education circuit. After a B.Tech degree from IIT, Delhi, and a management degree from IIM, Kolkata, he joined the Tata Group in 1983. From 1984, he served with the Taj Group of Hotels, and in 1999 he was appointed the COO of the Taj Business Hotels division. But soon after, in 2000, he accepted AT Kearney’s offer to be the director of their Indian operations. “It was a good break from the hotel industry and I always wanted to explore,” he says.

Taking charge:
However, the hotel bug was more deeply implanted than he had imagined. It resurfaced in 2002. “Despite a handsome compensation and a great learning curve, I began to feel bored. I didn’t want to be an employee any longer. I wanted to take charge,” says Keswani, who decided to venture into the hotel business. Though his parents weren’t particularly enthused by the idea, his wife, Sharanita, who was the marketing director at KFC, supported him—she later joined the business and is currently a part of the management team.

Having taken cognisance of the enormous gap between five-star hotels and guesthouses, he worked to fill up the mid-market segment. “I wanted to build a hotel where one could get 60% of the amenities of a fivestar hotel at 50% of the price,” he says. He planned to do this by cutting on space and cost wherever possible without compromising on quality or services.

He began by buying land in Gurgaon from his personal savings of Rs 1.5 crore and floating a one-man company, Krizm Hotels Pvt Ltd. “I chose Gurgaon because it had a high concentration of corporates which would be the real business generators,” he says. The next 14 months went into constructing the plan, the hotel building and the team, the last comprising a few colleagues from the Taj Group. By February 2003, there were 10 people on the rolls, and Keswani had figured out a fresh, youthful name for his pet venture: Lemon Tree.

Success and hurdles:
In May 2004, the 50-room hotel with a 24x7 cafeteria and a swimming pool was ready. With a one-night tariff of Rs 1,600 per room (today it’s Rs 6,000), the hotel registered a 40% occupancy in the first month itself. “We didn’t advertise, focusing instead on direct marketing. The concept clicked and business started pouring in,” says Keswani. In the first year, the company made a profit of Rs 1 crore.

However, it wasn’t a smooth ride all through. Though Keswani didn’t face any problems in arranging the initial investment thanks to his well-paying jobs and monetary support from his friends, getting the approval for construction was challenging, given the small piece of land. “The size of the plot was just a quarter acre, too small for a hotel with five-star amenities. The authorities took a lot of convincing, but we managed it,” he says. Putting in place a management team was another hurdle. “As the hotel wasn’t built at the time, people were hesitant to join us. I started with just one employee, who left a good hotel job to join me,” he says.

ranching out:
With success came confidence. In September 2005, Keswani opened another hotel in Gurgaon. In August next year came the big turning point. Private equity firm Warburg Pincus invested Rs 210 crore in Lemon Tree Hotels for a 26% stake, and Kotak Mahindra Realty fund put in another Rs 32 crore. “Acquiring a stake meant faith in our idea,” says Keswani. The funds were used to develop more hotels. In December 2006, Keswani stepped out of Gurgaon to set up a Lemon Tree in east Delhi. A year later, a 125-room hotel was set up in Pune, and another one in Goa. “Most of our hotels are occupied by business travellers, but in Goa, nearly 90% occupants are leisure travellers,” he says.

Future growth:
With Japan’s Shinsei Bank and Kotak Realty fund jointly investing $30 million (Rs 120 crore) to pick an equity stake of 5.9% early this year, Keswani is gung ho about the future. So he is planning another 11 mid-market hotels across the country and expecting a Rs 400 crore turnover in the next three years. “Four of these hotels will become operational this year,” says the man who doesn’t believe in resting on his laurels.

By next year, Keswani is intent on establishing economy-segment hotels. “These will be branded ‘Red Fox’ and the tariffs will be half of those in our mid-segment hotels. The first lot will come up in Delhi, Jaipur and Hyderabad by 2009-end,” he says. With so much in store, is a public issue also on the anvil? “Yes, we do have some plans tentatively scheduled for 2011,” he says. There’s always room for growth where Keswani is concerned.