Conquering SEA One Hotel at a Time

CEO of Hotel NIDA Kaneswaran Avili on a mission to standardise budget hotels across Southeast Asia

By Satoko Omata

Changkat Bukit Bintang, well known by locals and tourists alike for its abundance of bars and proximity to foodie heaven Jalan Alor. Within the area is a row of unassuming budget hotels catering to backpackers and wallet pinching travellers, especially for those looking for a local flavour. That has not changed for many years.

That is until a bright red sign appeared one day – luring travellers with the promise of good quality rooms that does not cost a fortune. On this end, branding is very important. “There are many hotels on this street, but NIDA stands out because of its branding,” says Kaneswaran Avili, Chief Executive Officer of Hotel NIDA, as he gestures to the fresh-looking hotel.

Hotel NIDA in Changkat Bukit Bintang is strategically located right behind the bars, within walking distance to Jalan Alor. It has an easy access to the Bukit Bintang shopping district, commonly known as the Golden Triangle, as well as convenient transport links to the business districts.

It is also one of the first fully branded hotel for Hotel NIDA, with three more properties slated for launch in Bangkok and Pattaya in Thailand this month. Aiming to grow its portfolio up to 50 hotels by the end of 2018, Kaneswaran is focusing on expanding the NIDA brand across Southeast Asia.

First incorporated in 2015, Hotel NIDA started its journey in Indonesia as Global Rooms Limited, later NIDA Hotel. Initially, it operated in a model similar to other budget hotel chains such as Singapore-based RedDoorz and Indonesia-based ZEN Rooms, which entailed the rebranding of a few rooms in the hotel and giving a standardised guarantee for reliable services. However, after talking to hotel owners, Kaneswaran realised that this business model wasn’t solving the entire problem with the hotel industry.

“If you look at the market now in Southeast Asia, almost 99% of the hotels are independently owned where they are not part of any franchise. This is especially true for hotels in the under-100 rooms category. In markets like the US, Europe or China, up to 70% of the hotels in the market are part of a chain. Players like China Lodging, Home Inn, Travelodge and Ibis are lucrative businesses easily worth US$3billion (bn) dollars each.”

From Rooms to Buildings

In Malaysia, AirAsia founder Tony Fernandes popularised budget hotel chains through Tune Hotels. However, Tune itself, along with international brand chain hotels like Home Inn and Ibis tend to focus on the over-100 rooms segment. Kaneswaran explains that Tune Hotels preferred new builds, which can be costly and time consuming. This does not account for difficulties in finding hotels in the right location either.

Kaneswaran Avili, Chief Executive Officer of Hotel NIDA

He adds: “Our capability to grow is much faster. If you look at unique economics of this business model, we are taking over existing business, we are not creating a new business. We are not adding capacity to the hotel industry, we are consolidating the industry by taking over capacity. It is a much more viable business model compared to new property build.”

Instead of just rebranding rooms, it has now moved from the soft integration model, to leasing entire properties from the existing hotel operators. This allows Hotel NIDA to have ownership of the business.

While the building will remain owned by the respective property owners, NIDA takes over total control of the operations of the business, paying the owners a monthly lease.

“For a lot of independent hotel operators, this is a great solution. A lot of them are invested into a hotel because they could not rent out the property. Most of them are not hotel operators. They are not happy managing it and to find the right people to manage it is not easy as well,” Kaneswaran shares.

Market Shifts

It is not just about taking over businesses. To Kaneswaran, he is answering the demand of a shifting market. Consumers are changing. Much like how flying used to be an experience, with full services airlines providing meals and luxuries on board; it is now a commodity. Now, it is about getting a seat, travelling from point A to point B.

He believes hotels are the same: “It is a means to rest. Consumers preference are changing; along with their requirements. They do not expect much things in the room, unless you are going to big resorts, which is a different category altogether.”

In most hotels, customers spend on average less than 13 hours a day in the room. Most of the experiences happen outside, whether people are travelling for holidays or for business. “The room just needs to be basic: strong good quality bed, proper pillow, decent shower, a working air-con, strong Wi-Fi; all in a clean, safe, secure environment. That’s all consumers need. Also, good location is very key,” Kaneswaran opines.

“Hostels are doing very well. The tube hotel concepts are doing very well too. Some people who stay in these hotels could be wearing suits preparing to go for a meeting. They do not want to waste money staying in luxury hotels. I think the future for these kinds of hotels are brighter as compared to luxury 5-star ones. There will still be a segment for them, but most consumers might move towards the budget hotel category. People like to have these kinds of new experiences.”

Breaking the Mould

Disrupting the Southeast Asian market is not as simple as the US and China; there is no one size fit all. As Kaneswaran describes, Southeast Asia is a tough market to crack mainly due to historical and cultural issues. The region is uniquely made up of many countries with very different geographies, languages, culture, education levels and skillsets.

Kaneswaran sees different challenges in every country he has experienced, but fundamentally they are not unique in experiencing the tough shift. Availability of talents, initial costs, moving funds from one country to another; those are some of the issues Kaneswaran commonly faces regardless of country. On top of that cultural differences, economics, paired with regulatory red tape contributes to the list of issues to tackle; but he is not disheartened. Far from it.

“The beauty of Southeast Asia is the strong adoption of internet and mobile apps. People are travelling more with the advent of low cost airlines. People travelling once a year are now travelling three to five times a year. Almost every month, people are going on holiday. I think it is becoming a norm now and that is boosting the travel industry,” he opines.

Even with this on-going boom for the tourism industry, Malaysia has a bigger challenge ahead compared to its other peers within the region. Kaneswaran observes the hotel industry in Malaysia is running on overcapacity at the moment, with most hotels operating under 50% occupancy. Having low demands, Malaysia’s average yield per room is low as compared to Thailand and Indonesia.

“Malaysia over time has lost to Indonesia and Thailand in terms of customer service. It’s not easy to get people work in these kind of jobs, Malaysians want to do much more sophisticated jobs. In turn we get a lot of foreign workers doing these kind of jobs; this is affecting the quality of customer service.

“The services industry needs to improve. Our customer service has been a challenge. This is something that needs to change and the only way it will improve is by using technology. By introducing more self check-in and checkout processes and managing whatever needs they have through technology; instead of having physical people, which can be hard to find.”

Tech Powered Future

In the digital age, businesses must keep innovating to stay ahead of the game. Hotel NIDA is not stopping either. Says Kaneswaran: “Our aim is not just to become a hotel chain but also to act as a technology provider that enables better customer experience when they are staying in our hotel. It is not for the in-hotel stay, we want to include all of the activities outside.”

While some hotels are replacing human receptionists with robots, Kaneswaran has other ideas: he wants to get rid of the need for a phone in the room. The plan is to have everything accessible through a mobile app. Whether it is to call the reception, order food, check-in, check-out – it is all on one app. He is also looking to integrate the other services to the app as well, such as tourist guides and food delivery services.

Beyond the app, Kaneswaran is looking to flip the tables, changing the overall landscapes of the hotel industry. The hotel industry has been fixed on a decades old system where travellers can only check-in by 2pm and have to check-out by 11am. Hotel NIDA will soon be introducing flexi-stay, where travellers can check-in and check-out at any time according to their convenience.

“We are able to do this because we have data on the percentage of people checking out and checking in at what times. Using this data, we are able to analyse and predict how many percent of the hotel rooms we can open up for this kind of product,” he says.

Taking a page out of an airliner’s book, he is also looking to introduce self check-in and check-out. Customers will be given a QR code, which they can then scan to unlock their room doors.

Non-Stop Learning: From the Skies to the Ground

Looking at the branding of Hotel NIDA, you would be forgiven in thinking it bears a striking resemblance to AirAsia and Tune. In fact, prior to his entrepreneurship, Kaneswaran was part of AirAsia, gaining knowledge and experience in the major markets across Southeast Asia, including Malaysia, Indonesia, Thailand, Philippines and China. He also has experience developing Tune Hotels, giving him the advantage of understanding the challenges faced by that business model.

Kaneswaran attributed much of his knowledge and success to his experience with the low-cost carrier: “AirAsia was always an entrepreneurial environment. Every employer with AirAsia has been taught to become an entrepreneur by Tony Fernandes. By working directly under him, I had that luxury.”

However, being an entrepreneur and being an employee is entirely different, he points out. “The last two years has been a phenomenal journey, I have learnt a lot and I’ve never learnt as much before ever in my career, even in AirAsia!” he laughs. “I am lucky to have Dennis Melka as my co-founder backing me and training me tirelessly.”

From proving to the market his business model works, to winning customers, vendors, hotel partners, Kaneswaran had to overcome the many obstacles commonly faced by entrepreneurs across the globe including hiring the right kind of people, building the right technology and raising money.

“But I have no regrets,” Kaneswaran smiles. “It is very fulfilling and I am very lucky, I have a very good board of directors and good investors, who support me a lot.” One of the biggest learning grounds, he found, was through fundraising. Meeting investors and hearing about his business from their perspective, it was a tough game, with highly competitive players, and very high stakes.

“You learn to see how others are looking at you and how they view your business. What interests them and what does not. How they view your business as compared to how you view your own business is two different things,” he notes. “At the Series A round, which we raised 5.6 million dollars, I met at least 500 potential investors and I scored two. Meeting so many of them and having to keep hearing no – it was a big deal.”

Besides talking to investors, Kaneswaran also regularly engages with customers and staff, as well as being on the ground as a member of staff to understand his team better.

“Being a promoter of your own business, it is a big skill you need to have. Fundraising, negotiation, building a team, building a culture within your company, hiring, firing, I’ve done a lot of that, especially firing,” he chuckles.

Onwards and Upwards

Hotel NIDA also connected to more partners via the Malaysia Digital Economy Corporation (MDEC) Global Acceleration and Innovation Network (GAIN) programme. GAIN has been actively helping local companies in Malaysia to scale up and scale out, growing their businesses outside of Malaysia.

“I have been very vocal in how MDEC can further help startups like us. In a couple of conferences, I voiced out the need for MDEC to help entrepreneurs like us go overseas, in terms of PR, marketing and media support. They took that advice strongly and built a strong network that feature media support for entrepreneurs, which is great.”

Through getting more media recognition overseas, Hotel NIDA aims to expand into other parts of Southeast Asia, like Thailand, the Philippines, Vietnam. Currently, Hotel NIDA has already set-up their second hotel in Sukhumvit, Bangkok. Initially focussing in Thailand, Kaneswaran sees huge potential in the neighbouring country. With a strong and growing tourist market, Thailand’s hotel industry enjoys high occupancy and a high yield compared to Malaysia.

Besides expanding the business, MDEC also provides support in finding the right local talent in technology, as well as advise Hotel NIDA on work permit processes for foreign workers. As a startup, Kaneswaran knows that he needs to get the right talents quickly, especially in IT.

With a lack of available IT resources, it has been a tough challenge for many businesses to grow around the region. “It can be time consuming and expensive. Skill-wise, we can get cheaper and skilful employees from overseas. Malaysians generally want to work for major players such as Google and AirAsia; in the sexy industries, rather than the industry we’re in and that’s been a challenge.”

With MDEC GAIN, Kaneswaran believes he can change the trend and make it possible and viable for local IT talents to consider getting into the fast-growing startup scene in Malaysia.

Eyes on the Prize

In the modern age, industries are moving and transforming at rapid speeds. Customers’ expectations are equally as demanding. To keep up, Kaneswaran strongly believes the need for companies to keep innovating, and encourages young startups to drive the momentum for change.

“Be daring and go for it. Do not be afraid. The future is going to be driven by new innovators and disruptors. There are so much opportunities out there,” he advices. “People who do not change, will be changed. There will be more players like us, with new innovations. People are trying new things – some will work, some will fail, those that work will certainly grow.”

The startup scene is very competitive, but Kaneswaran has never let it deter him from focussing on his goals. “For startups, do not worry about any competition, worry about yourself. Focus on what you do. Competition will be there. Ultimately the biggest competition for you is yourself. I do not look at the competitions at all!” he jokes.

“I like what Tony (Fernandes) says: the biggest enemy for the business is the cost. The biggest challenge for us is ourselves. Our efforts, our ability to change, to innovate, and most importantly, to provide better services to our customers,” he concludes.

This was the Cover Story in the Business Today magazine, March 2018 issue

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