Standard - March 7, 2006
Smell the coffee. Not from a percolator,
but in the midst of a coffee estate. And
wake up to the collective birdsong from
300 different birds. If you're looking for
a taste of plantation life, make a quick
getaway to the coffee estates of Coorg,
just a five-and-a-half hour drive from Bangalore.
Tata Coffee will soon be opening its bungalows,
once lived in by planters, for vacationers
who love the outdoors. While it may be a
great holiday idea for you, for the Rs 203
crore Tata Coffee, Asia's largest coffee
company, it's a serious business proposition.
Says M H Ashraff, managing
director, Tata Coffee, "We need to
diversify into other areas so as not to
become over-dependent on commodities."
Ashraff believes that turning the plantations
into a tourist retreat was a natural fit,
especially since the company has around
20 bungalows. The gameplan is to initially
let out 12 bungalows and then scale up operations.
By the end of 2006, the company hopes to
be able to let out 15 bungalows. Ashraff
will not divulge any revenue targets.
But a back of the envelope
calculation shows that at an occupancy rate
of 50 per cent for 70 rooms, used for 200
days in the year at an average room tariff
of Rs 3,000 per room (taxes extra), revenues
could be in the region of a little over
Rs 2 crore in a year. The F&B will bring
in some more money: a meal for one costs
Rs 250, or Rs 350 if you want it a little
more elaborate. Breakfast is on the house.
The initial investment hasn't been too large.
It could cost Tata Coffee approximately
Rs 10-20 lakh on average to refurbish each
of the bungalows.
That apart, the
company will be investing in housekeeping
and waiting staff. Running costs are not
likely to be too high, says vice president,
corporate, Christine Jamal. A sound business
idea? "Certainly a great way to sweat
one's assets," says an industry watcher,
"because the bungalows are lying vacant.
At an initial investment of around Rs 3.5
crore and fairly low operating costs, the
payback period should not be more than three
to four years, provided revenues stabilise
at Rs 2 crore.
However, it's clear
that the business cannot be scaled up significantly,
unless the company builds more bungalows.
"We will look at expanding into the
tea gardens later," says Ashraff, referring
to the five tea gardens that the company
recently bought. Also, with already more
than 1,000 homestays in the Coorg area,
Tata Coffee may not be in a position to
raise room tariffs beyond a point, so it
will need to offer something to differentiate
itself. Any tips from Indian Hotels? "No,"
laughs Ashraff, "We're doing this our
way; Plantation Trails is going to be different."