Oberoi Group of Hotels Narrative Essay
Introduction
The Oberoi Group, founded in 1934, employs about 13000 people worldwide and owns and manages about thirty hotels and five luxury cruisers as of 2012. The company was incorporated in the year 1949 by Rai Bahadur M. S. Oberoi to run “Oberoi Group of hotels”. The group of companies, affiliated through common ownership interest, has to offer first class luxury hotels, airline catering, airport bars and restaurants, corporate air charters, travel consultancy, limousine services and project management.
With hotels being spread out in Mumbai, Delhi, Calcutta, Chennai etc. , we can see it covers almost the entire p of the country. It also has properties abroad in places such as Cairo and Aswan in Egypt; Bali and Lombok in Indonesia; Mauritius; Medina in Saudi Arabia and a new property coming up in Dubai in UAE. EIH, the flagship company of The Oberoi Group is generally preferred by business travellers because of its consistent and high quality service across different locations. Exhibit 1 displays some reviews posted by customers who have had the pleasure of staying at an Oberoi hotel.
As can be seen from their reviews, the main highlights of their stay were the ambience/facilities and highly motivated and well trained staff who provide exceptionally attentive, personalised and warm service. Such a holistic experience can be achieved by an organization through consistent efforts. Thus the purpose of this report is to understand these efforts which Oberoi has synergized and use it to study effective organization strategy and culture. Growth and Strategy “Rai Bahadur Mohan Singh Oberoi was born on 15th August, 1898 in erstwhile undivided Punjab, which is now in Pakistan.
He was only six months old when his father died. Success and fortune did not, therefore, come easily to him. Initiative, resourcefulness and hard work, combined with the capability to face and overcome the most overwhelming odds can best characterise this phenomenal entrepreneur. ” The above words about the founder, speak of the qualities he employed to make the Oberoi group reach the pinnacle it is at. When M S Oberoi first reached Shimla, he took up work as the desk clerk at the Cecil hotel. Today, the hotel is owned by the Oberoi Group and is called The Oberoi Cecil.
The then manager of the hotel was happy with the work put in by Mohan Singh and asked him to assist him running another hotel he acquired, Clarkes hotel. With this first-hand experience of operating a hotel, Mohan Singh set out on his entrepreneurial venture. In 1934, he acquired two hotels, The Clarkes Hotel in Shimla and Delhi by mortgaging his wife’s jewellery and all his assets. The Company was incorporated as a public limited company in India on 26 May 1949 and its initial business activity was as the lessee and operator of The Oberoi Palace Hotel in Srinagar, Kashmir.
It was in 1965 that they built their first hotel, The Oberoi Intercontinental, now The Oberoi, New Delhi. It offered facilities that no other hotel in the country could match and was India’s first luxury hotel. In 1966, The Oberoi School of Hotel Management later renamed the Oberoi Centre for Learning and Development was formed. It provided high Quality professional training in hospitality management. The complete list of events that shaped Oberoi’s growth is given in Exhibit 2. Mr Oberoi was the first Indian to work in association with international chains to woo international travellers to India.
This caused a large number of international travellers to offer their patronage. The foreign occupancy rose to a healthy level of 85%. Mr M S Oberoi had great vision and imagination. He converted dilapidated palaces and buildings into magnificent hotels. Some of these are the Windsor in Australia, Mena House Oberoi in Cairo and Oberoi Grand in Kolkata. The Oberoi Cecil in Shimla, built in the early 20th century, reopened in April 1997 after extensive and meticulous renovation. Strategy: Thus the Oberoi Group’s strategy under Mr M S Oberoi’s leadership was quite clear.
Since the start, they have focused on expansion of their operations by catering to newer markets. The decision to offer world class hotels to International travellers was the mind of an ambitious businessman looking to expand his offering. Also multi location presence helped reduce concentration risk. It is this for this international image that foreign properties were acquired and assimilated into the luxury and top quality services from Oberoi. The search for newer markets was responsible for introducing its second brand of hotels, ‘Trident’. Trident hotels are five-star hotels that have stablished a reputation for providing the best in excellence bundled with an affordable price tag. Thus catering to the middle income segment and corporate clientele was the strategy. With this new brand, spread across nine locations in India, Oberoi now had a major share of the hotel industry. Exhibit 2 also mentions the strategic partnership with Hilton for the international marketing and handling of reservations of the “Trident” hotels. The hotels, as part of this partnership, were to be re-branded “Trident Hilton”. However with Hilton trying to establish its own Garden Inn hotels in direct competition with Trident caused Oberoi concern.
Thus it abandoned the arrangement with Hilton and re-marketed its hotels under the name Trident itself. The Oberoi Group, along with its subsidiaries and other brands, stands as one of the most decorated hotel chains in the world with many of its group hotels bagging various awards and accolades from Travel+Leisure, Conde Nast Traveler, Forbes and Galileo. While the business strategy and outright aggression in expansion has been a key to this success, it needs to have been supported internally though a resilient culture and committed human capital.
Let us now try to uncover some key aspects of The Oberoi Group’s culture and workforce. Structure As facilities grow in size, hotel or lodging managers find the need to group certain jobs in order to ensure effective coordination and operational control. While departments may be grouped as front of the house (having guest contact) and back of the house (employees with no guest contact), Oberoi follows the practice of separating departments by function. Exhibit 4 shows the structure of a typical full service Oberoi hotel.
Even though such a structure is normally followed by a hotel with size over 500 rooms, the sheer size of some of the Oberoi properties require such an elaborate structure. The divisional structure followed by Oberoi is in line with its culture and its objectives. The functional division promotes specialization. This specialization in turn increases worker productivity and efficiency. Culture The core values of The Oberoi Group are articulated through their dharma, which was developed by their own employees. Their dharma articulates their commitment to display core values through their action and behaviour.
Elements of the dharma include Conduct of the highest ethical standards; a Focus on teamwork and mutual trust; Maintaining excellence in guest service; Protecting the safety, security, health and environment of guests and each other. The Dharma has more aspects as well which together apply to all aspects of the group’s business (Exhibit 3). The employee is expected to make all decisions and all interactions based on the Company Dharma. By placing robust mechanisms and communicating specific conduct expected from each employee, the company has made it possible to put this Dharma into action.
Oberoi does not believe it is in the business of hotels, instead it claims to be in the business of memories. The company empowers its employees to believe – “I don’t just work here. This is my hotel. ” The Power of 1500 – Any employee in the hotel can offer anything at a cost value of INR 1500 without seeking prior approval, any number of times, to any number of guests – no questions asked. The objective is to create guest delight. Guests who have received the power of 1500 have been happy with the service they received.
The real power of this program is that because of the freedom employees have, guest get an incentive to spend more, they come back and share their positive experience by word of mouth. This directly affects the company’s bottom line. It’s these small ideological differences which make a difference in sustaining the culture over time and across borders. The People The Oberoi Group takes pride in having the best service professionals in the industry. Throughout the year, the organization stimulates and rewards exceptional performance that best exemplifies outstanding service.
Some of these awards are i) Outstanding Performance Award, ii) Employee in Spotlight, iii) Peer Recognition Program, iv) Star of The Month etc. Oberoi has employees who continue to celebrate a long tenure with the organisation, in some cases over 30 years. Many of their employees have completed their certification from the Oberoi Centre for Learning and Development (OCLD) and have built successful careers up to the general manager level and in some cases senior executive positions with the corporate office. In mid-management positions, their average tenure is around six years.
As the war for talent continues across many industries, their retention strategy encompasses a variety of different elements. They undertake regular employee opinion surveys to understand employees’ needs. Their surveys reveal that while compensation remains an important component for people, they are increasingly focused on clear career plans, access to “best in class” learning and building a work-life balance. By catering to these requirements, they have been successful in providing the best experience to their customers through a committed and engaged workforce. Technology
In the hospitality sector, ensuring the comfort of your guests is paramount. However, in today’s increasingly demanding consumer marketplace, meeting that need could be a real challenge. This is especially true for Oberoi Hotels, a luxury group of hotels favoured by government officials and business travellers. Not only does the hotel have to cater for well-heeled makers who want to make use of features such as interactive TV, IPTV and wireless networking, it also has to meet the stringent security requirements of business users who want to be sure that whatever data they access during their stay will remain secure.
In addition to this, it has to ensure that its fire safety, car parking and networking facilities meet the demanding safety standards required by government officials and high-profile business people. In response the hotel installed a highly available and highly secure network that would enable it to deliver the security and functionality required by its guests. In terms of fulfilling the networking demands of the business itself, the solution provides a solid, reliable platform for running all the hotel’s crucial applications – including reservations, billing, internal accounting, and digital signage.
Size and Organization Life-Cycle Size: For the Financial Year ended on 31st March, 2012, the Company’s Total Revenue was Rs 1147. 33 crores. The company posted a net profit after tax of Rs 122. 42 crores against Rs 64. 54 crores during the previous year, which is a 89. 68% growth or Rs 57. 88 Crores over YTD March 2011. It is one of Asia’s leading hospitality companies. Even though the company has multinational presence, there is a lot of decentralization in decision making at the lowest rung. As mentioned above, policies such as “power of 1500” enable employees to exercise a fair amount of decision.
This is on account of being in a business centred on customer satisfaction. This amount of leeway translates to good customer experience directly increasing repeat business and word of mouth publicity. The formalization is well set. A company operating on the scales of Oberoi needs to have well-structured and standardized operations. Though the overall themes and products may differ the rules and procedures are well defined for each employ to enable him to work in synergy with the Oberoi Dharma. Life Cycle: In the entrepreneurial stage, Mr Oberoi didn’t have to devote a lot of time to develop a product or service.
His experience in managing the operations of Clarkes Hotel already gave him enough knowhow on the business of running a hotel. Thus he could provide the strong leadership that was required to propel the company. In the collectivity stage, again it was Mr Oberoi’s well guided leadership which kept the sails flying high. They were focussed on expansion, but took enough time to mobilise resources. There was enough gap between 1934 when he acquired the first hotel and when the company got incorporated in 1949.
Again there was almost a 15 year gab before which Oberoi group set up their own hotel. These timelines gave enough time for the newly formed workforce to grow along with the values of the founder and the organization. This also helped in the formalization to the elaboration stage. The rules and procedures which did get established were in line with the culture of the organization. This meant that the different properties established across the country or acquired world over, could inculcate the same culture all over without there being too much red tape.
Decisions such as setting up their own printing press to maintain high standards all over in stationery are an example of how strict procedures or standards were maintained while not causing problems within the internal management. The management in different hotels did not need to coordinate now with each other for procuring same quality of stationery. Presently the Oberoi group is in the elaboration stage, with different subsidiaries handling their different businesses. They are structured similarly and with varying controlling interests, Oberoi now is in a stable position in its sector.
Its plans involve expansion and other ventures and partners to collaborate with.
Complexity-Stability Model
The patterns and events occurring in the environment can be described along the two major dimensions. These are the Simple-Complex and Stable-Unstable dimensions. Complexity: The Oberoi Group, dealing majorly in hospitality, is subjected to Complex environmental factors since the hospitality industry has many players and has to cope with numerous dynamic governmental regulations, competition for quality employees ; new trends etc.
Thus it is affected by numerous diverse external elements. Stability: The Stable-Unstable dimension refers to whether elements in the environment are dynamic. A domain is stable if it remains the same over a period of months or years, whereas under unstable conditions, environmental elements shift abruptly. As mentioned above, there areas number of dynamic factors which affect the hospitality industry. With budget hotels also eating into their share by offering value for money and the economy in recession, corporates are taking their patronage to relatively greener pastures.
Thus the hospitality industry and Oberoi group face complex, unstable environments. The Competition The major domestic competitors of the Oberoi Group of Hotels are Taj Group, ITC, De-Meligan and Leela Group of Hotels. This presents a tough competition to Oberoi as in the luxury segment, supply exceeds demand in several cities, as per an analysis in EIH Ltd’s annual report. India has often been cited as one of the most lucrative albeit difficult markets to develop properties in with a long development cycle of three-five years, adding to the cost.
Apart from the domestic competitors, the Oberoi group faces immediate concerns with major international brands, which are expanding their presence in India. Some of these brands are The IHG group, Wyndham Hotels, Marriott International and Hilton Worldwide. These international hotel chains are not just targeting the luxury and premium segment, but also the upscale, mid-scale, budget and upper budget segments. Another advantage to these chains is that International travellers are accustomed with these international chains and so it is very difficult for Indian chains to break the associated loyalty.
However, to fight competition, Oberoi and its domestic competitors such as The Taj Group are looking to add newer properties, ranging from the budget category to luxury. Exhibit 4 – lists out the existing hotels of International chains and the upcoming ones with their planned dates and categories. It shows how International Hotel chains are gaining ground in India and are bullish on their India expansion plans, giving tough competition to home-grown biggies. Conclusion We have just gone through the organizational design of The Oberoi Group.
We have studied its strategy, its culture and people, the competition and business environment it operates in. So what exactly does the organization do right to cater to all these external factors and still come out as one of the leading hospitality companies in Asia and the world? Strategy is one important factor that affects organization design. Oberoi group’s strategy has always been one of expanding markets through targeting different income segments, acquiring new properties and setting up hotels in different countries.
This strategy makes a lot of sense if we consider the constantly changing environment of the hospitality industry as discussed in the Complexity-Stability Model. By changing the target segment along with the market trends, the company has been able to keep up its high standards with the customers. Its present size and elaborative stage in its life-cycle also enable it to follow this expansion strategy. Due to the brand value it garners, additional investments will also continue to reap in business despite the competition. Another point to note from the unstable-complex environment of hospitality industry is the structure of the organization.
As we have seen above, the structure is highly differentiated and is highly organic. The differentiation is accompanied with high integration as well. The decentralized decision making at the operation level is required to have a participative workforce working towards customer satisfaction. Seasonality, economic upheavals etc. requires a lot of forecasting and the decentralized atmosphere allows the required high speed response. Lastly, the culture of the organization which is centred on the Oberoi “Dharma” is also in sync with its structure and design. Formalization is high at Oberoi.
The rules and procedures are well defined which implies every employee is well aware of his responsibilities. Thus he can exercise his discretion with complete freedom while making decisions. Also this formalized structure allows standardization across its hotels across the world. Thus we can see that the design of the organization fits its workflow in a complementary manner. This has helped Oberoi keep its head above its competition and sustain itself successfully for over 75 years. The strong leadership has guided it with smart focus on targeting segments that offer new opportunities.
Thus we can see that Oberoi is a good example of an organization that has used its structure and strategy to forward its business and remain successful. Exhibit 1 Customer Reviews About “The Oberoi, New Delhi” About “Mena House Oberoi Hotel, Giza, Egypt” Exhibit 2 Major events in the history of the Company Year| Major Events| 1949| The Company was promoted and incorporated by Rai Bahadur Mohan Singh Oberoi and Oberoi Hotels (India) Limited, in May 1949. | 1956| The equity shares of the Company were first listed on the BSE.
Took the Maharaja’s palace in Srinagar, Kashmir on lease and converted it into The Oberoi Palace Hotel. | 1957| Started the flight services business. | 1965| Commenced operations at The Oberoi Hotel, New Delhi. | 1968| By a scheme of merger approved by the Calcutta High Court, The Associated Hotels of India Limited and Hotels (1938) Private Limited merged into the Company. By virtue of the merger, the Company acquired The Oberoi Grand, Kolkata, Maidens Hotel, Delhi, Palm Beach, Gopalpur-on-sea (operation suspended), The Oberoi Cecil, Shimla, The Mount Everest, Darjeeling (operation suspended). 1973| Commenced operations at The Oberoi Towers, Mumbai. | 1974| Established a printing press in Delhi primarily for the Company’s in-house needs. | 1979| Bonus issue of 1,337,745 new equity shares of the Company of Rs. 10 each in the ratio of one new equity shares for every five equity shares held by the shareholders. | 1984| Bonus issue of 4,953,131 new equity shares of the Company of Rs. 10 each in the ratio of two new equity shares for every five equity shares held by the shareholders. 1986| Made a foray into the airport services business by entering into a ten year contract with the International Airport’s Authority to operate all the snack bars and restaurants at the domestic and international terminals in Mumbai. | 1992| Bonus issue of 4,720,704 new equity shares of the Company of Rs. 10 each in the ratio of one new equity shares for every five equity shares held by the shareholders. | 1994| Listing of GDRs on the London Stock Exchange. | 1996| Change of name of the Company from The East India Hotels Limited to EIH Limited. Bonus issue of 17,464,299 new Equity shares of the Company of Rs. 0 each in the ratio of one new equity shares for every two equity shares held by the shareholders. | 1997| Commenced operations at The Oberoi Rajvilas in Jaipur, our first luxury leisure hotel in India. | 2004| The Company entered into a strategic alliance for international marketing with Hilton International. All the “Trident” Hotels were re-branded as “Trident Hilton”, and the Oberoi Towers in Mumbai was re-branded as the Hilton Towers. | 2006| Sub-division of the face value of equity shares from Rs. 10 to Equity Shares of Rs. 2. Bonus issue of 130,984,657 new equity shares of the Company of Rs. each in the ratio of one new equity share for every two equity shares held by the Equity Shareholders. The Company acquired a 66. 67% equity stake in Mercury Car Rentals Limited, a joint venture with Avis Europe for car rental business. | | The printing press established by the Company in 1974 was granted permission by the Indian Banks’ Association to print security stationery for banks. | 2008| The alliance with Hilton International ended and “Trident Hilton” and the Hilton Towers Hotels were renamed “Trident” Hotels. Establishment of EIH Flight Services Limited, Mauritius as a wholly owned subsidiary of the Company.
Entered into a joint venture agreement with 26% equity interest in L;T Bangalore Airport Hotel Limited for a hotel project near the Bangalore international airport. Terrorist attack at the Trident, Nariman Point and The Oberoi, Mumbai in November, 2008 resulting in interruption in business and closure of both the hotels. The Trident Mumbai re-opened on 21 December, 2008, after the terrorist attack. | 2009| Entered into a joint venture agreement with 16% equity interest in Golden Jubilee Hotels Limited for the proposed Oberoi and Trident Hotels in Hyderabad. 2010| The Oberoi, Mumbai re-opens after full renovation subsequent to the terrorist attacks in 2008. EIH International Ltd, a wholly owned subsidiary of the Company completed an acquisition of approximately 46% of the equity interest in its international hotels joint venture company EIH Holdings Ltd. Pursuant to this acquisition, EIH Holdings Ltd is now a wholly owned subsidiary of EIH International Ltd. | Source: Information provided at website of EIH Ltd, a subsidiary of Oberoi Group (http://www. eihltd. com/about_eih/milestones. asp) Exhibit 3 – Dharma: Fundamental code of conduct
Exhibit 4 – Department Structure Exhibit 5 – International Hotel chains in India GAINING GROUND International hotel chains are bullish on their India expansion plans, giving tough competition to home-grown biggies| Group| Existing hotels| Planned hotels** (in Rs)| By when| Category| Planned new brands| IHG*| 12| 150| 2020| Mid-market| Holiday Inn Express| Wyndham Hotels| 14| 60-70| 2017| Mid-market| Howard Johnson| Marriott International| 18| 80-100| 2015| Across segments| Fairfield, Ritz| Hilton Worldwide| 8| 50-60| 2016| Luxury/ premium| Hilton, Double Tree, Hilton Garden Inn, ; mid-market Hampton,
Conrad and Waldorf Astoria| Accor| 13| 90-100| 2015| Luxury, mid-scale and budget| Formula 1, Sofitel and Pullman| Choice Hotels International| 27| 100| 2017-19| Mid-market| Sleep Inn, Cambria Suites, Econo Lodge| Best Western International| 34| 66| 2017| 3/ 4 and 5 star| Best Premier| Starwood Hotels| 33| 50-60| 2015| Across segments| St. Regis, W| Carlson| 46| 100| 2015| Mid-market and premium| Regent| Hyatt Hotels Corporation| 8| 50| -| Premium| Hyatt Place, Hyatt House| *InterContinental Hotels Group; ** Estimate Source: Industry and ICRA estimates|
References
- Oberoi Hotels ; Resorts. (2012). [online]. Viewed 2012 October 15. Available: http://www. oberoihotels. com/
- The Oberoi Group. (2012). Careers at The Oberoi Group. [online]. Viewed 2012 October 19. Available: http://www. oberoigroup. com/careers/index. htm SHRM India. (28/06/2012).
- The Oberoi Group of Hotels–Translating Dharma into Best Practices in HR. [online]. Viewed October 22. Availaible: http://www. shrmindia. rg/oberoi-group-hotels%E2%80%93translating-dharma-best-practices-hr
- P Mullick, 2012, ‘Oberoi Group: Social media increasingly important as recruitment tool’, Hindustan Times, October 18 S Baggonkar, 2012, ‘Taj,
- Oberoi under pressure from foreign hotel chains’, Business Standard, July 17 M Kaushik, 2010, ‘Guest Star: The Oberoi’, Business Today, September 5
- Audited Financial Report for EIH Ltd. for the year 2011-12 Oberoi Hotels and Resorts. (2012). [online]. Viewed October 22. Available: http://en. wikipedia. org/wiki/Oberoi_Hotels_%26_Resorts
