Lemon Tree By Stephen Allison and Chester Hiu

On June 20th the Cal Poly MBA class of 2013 had the pleasure of meeting with Mr. Rahul Pandit, a member of Lemon Tree’s senior management. Our research on the company and meeting with Mr. Pandit has given me an intimate understanding of Lemon Tree’s business philosophy.

Lemon Tree Hotels was founded in 2002 by Patanjali Keswani. There are three tiers in the Lemon Tree line: the Red Fox economy brand, the mid-scale Lemon Tree Hotels brand, and upscale Lemon Tree Premier. Between the three lines there are 21 hotels in 14 cities, making them the 3rd largest hotel chain in India.

Lemon Tree is a playful brand that never takes itself too seriously. For example, the walls of the lobby café are adorned with quirky baby tee shirts featuring slogans such as “I used to have a handle on life but it broke off” and “Are you the opposite sex… or am I?” Lemon Tree exudes an extroverted, young, quirky, and clever vibe that masks its five-star service for a three-star price. Lemon Tree is able to attract a younger-at-heart crowd through its use of a novel, ironically immature atmosphere.  Lemon Tree is very much an Indian company. Modern Indian business outside of IT is in search of a unique Indian identity, and Lemon Tree is doing its part establishing it.

The vibe of the hotel is extroverted, young, quirky-but-likeable, and smart, like a Hollywood waitress trying to make it and you can’t help but tip a little above your usual rate. She hasn’t made it yet but it is inevitable she will and you want to see her there. It is because Lemon Tree is the waitress and not the fully realized movie star that it gets away with its business model: provide a 5 star experience at a 3 star price. The movie stars, like the Hilton or Four Seasons, have to take themselves seriously because they charge too much to act young. Their brand is built on maturity.

On the cost side Lemon Tree management is equal parts analytic and brutal. There is not one single thing, not even the pencils supplied with the notepads, that hasn’t been carefully considered. Management believes that costs are the one thing that is completely under their control and control it they shall. And, like it always does, the hard work pays off. Financially the business model pays off: Lemon Tree can provide an equal service to their competition at a lower price and remain profitable.

Another unique trait of Lemon Tree is their attitude towards corporate social responsibility. As of today 6% of all Lemon Tree employees suffer from a disability, and this number is planned to rise to 10% within the recent future. Extra cash is spent on teaching able-bodied employees Indian Sign Language. One may think “why incur this unnecessary cost? Lemon Tree is a business, not a charity after all. How does this fit with the identity of a hotel chain?” But management does not see this as cost; rather it is an investment. The employees with disabilities are found to be at least as productive, and often more productive, than their able bodies colleagues. Viewed in the macro perspective, there are tens of millions of perfectly capable Indian workers with disabilities who are unemployed due to discrimination. In fact, 90% of the PWD (People with disabilities) population is below the poverty line. Changing attitudes can lead to higher employment and higher GDP for India.

Changing attitudes is an accurate way to think of Lemon Tree’s influence today. Indian business is still searching for an identity as only recently have large companies been able to succeed here. IT is the success story of the last decade but IT alone cannot sustain a country of 1.2 billion. The coming decade must see success in new sectors, and Lemon Tree has risen to the challenge of defining what a modern Indian hotel can be.

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