While there is no sure fire recipe for corporate success, brothers – Vinod Thimmaya and Vivek Madappa, the founders of HummingBird Suites (HummingBird) – seem to have found a winning mix after all. HummingBird provides accommodation solutions for business travelers. Modeled on the efficiency of service apartments, the duo found their product differentiator when they decided to cater to only corporate clients and have built a niche for themselves by finding an apt alternative to high cost hospitality.
“Our success has been our ability to address the needs of businessmen and executives by combining the advantages of a low-cost option of a serviced apartment with the comforts of a 5-star hotel at a moderately higher tariff than serviced apartments,” says Vinod Thimmaya, co-founder and managing director, HummingBird.
“We kept the model simple. We realised that our clients had a problem of finding hotel rooms and 5-star hotel prices were sky high when we started in 2005.” – Vinod Thimmaya
And their clients are a happy lot. Aligning with HummingBird has helped cut their executive travel costs by nearly 70 per cent while executives are content that their stay comforts remain uncompromised. It is little wonder then that HummingBird’s clientele boasts of an enviable mix of top players from every sector of the industry. Since being founded in 2005, HummingBird has made tremendous progress, clocking Rs. 21 crore in revenues last year. By 2012, HummingBird estimates its revenues to touch the Rs. 100 crore mark with a presence in tier-two business towns like Baroda, Ahmedabad and Madurai in addition to consolidating in all the metros.
Making smart moves
The brothers started off with a seed capital of just Rs. 3 lakh and the business managed to show operating profits of Rs.1.5 crore in its very first year. They worked out the economics of the capital-intensive hospitality game and devised an asset-light model. They leased out apartments instead of outright purchase. This kept their operational costs low and helped the venture stay afloat until they found their first clients in Philips and Cisco.
Challenges cropped up at both ends of their business. On one hand they had an uphill task of negotiating with several apartment owners to lease out their properties to a business venture whose founders had no prior experience in the hospitality industry and on the other hand, they had the task of marketing a fairly new and untried corporate concept. Thimmaya says, “We kept the model simple. We realised that our clients had a problem of finding hotel rooms and five star hotel prices were sky high when we started in 2005. The value that we offered to our clients – in terms of costs, attractive looking rooms with a home-feel to them and even location – is what helped us clinch our early clients.”
They worked backwards and primarily marketed the concept to corporate houses. They armed their business proposition with figures and statistics to substantiate their cost-saving structure. In some cases, clients even agreed to outsource the complete stay solution package to HummingBird against a two-year contract and an initial advance that would be retained as a deposit. “We provided data that showed how much our clients could save on their annual budgeted costs if they aligned with us instead of a hotel,” recalls Thimmaya.
For deposits they had to pay for the leased apartments, they managed to convince the owners to accept the deposit not as a lump sum but as a deferred payment over a period of time. Their pricing strategy in the Rs 1,500-4,500 range for an apartment as compared to steep tariffs at hotels was the key differentiator. Companies were sold on the assurance that they would not be billed for any cost escalation during their contract period. This gave their clients an added advantage of planning and allocating an almost exact budget for their travel costs. HummingBird scores high on the value proposition with one third the cost implications (of a five-star business hotel) at three times the space and luxury.
Managing the inventory
The promise of managing the entire turnkey and stay solution for their clients was spruced with right ambience for a business environment and unparalleled service standards. You will find a HummingBird Suite in prime locations scattered across cities. Most properties are within a two-kilometer radius of the client’s office. Their operating model is also unique and exudes the ‘home-like’ feel and privacy to their clients. Today, it has 500 rooms across five cities including Bangalore, Mumbai, Pune, Gurgaon and Hyderabad. Each property they lease comprises around 10 two to three-bedroom apartments. HummingBird properties all have a ‘hub’ which acts as the lobby, which is supervised by a trained resident manager who takes care of the entire administration as well as each client’s specific needs. The dining area caters to food needs while association with other corporate clients gives it a business-like atmosphere. Currently, HummingBird has a crew of 60 employees.
“Our sales strategy is maximum coverage of the market through hardcore selling as opposed to position calls made by most operators in hospitality business,” says Thimmaya, while stressing on the 500-strong client number.
Most other operators would aim for a fixed contract with clients, ensuring 100 per cent occupancy of their rooms. But, the brothers kept their eyes set on the company’s growth path and 50 per cent was retained to ascertain how the variable market worked. They made steady efforts to understand buying behaviour and patterns of their clients. Within the first year, they extended their presence to another city, Hyderabad, after making in-roads in the mature Bangalore market.
“We realised that although there were a number of established players locally, there were none with national presence,” explains Thimmaya. The U.S.$ 4 million they raised from Bangalore-based Helion Ventures in 2008 helped them spread their wings to other prominent metros like Mumbai, Delhi and Pune. While the slowdown in 2009 saw HummingBird on consolidation mode, they are looking to double its current 500-room capacity within the next three months. The business is looking for additional funding of around U.S.D 15-20 million to help it penetrate into other metros like Chennai and Kolkata.
Plans are in place to ramp up services to include transit accommodation for relocating expatriates as well as corporate group stays for induction and training programmes. The plan is to take the business to the next level by also incorporating leisure travel into the corporate framework along with exploring foreign markets. Within a short span of five years, HummingBird has found the fastest and shortest route to success by offering companies a ‘one-stop-solution’ for all their accommodation needs.