Lemon Tree Hotel Company: Beyond Value Chain Integration

Abstract

Patu Keswani, CEO of Lemon Tree Hotel Company, had his finger on every pulse of the hotel business in India. During his ten year tenure with Indian Hotels, he recognized that there was an underserved need for hotel rooms in the mid-market and economy categories (between INR 2000 and INR 5000 per night) in India. It is this latent demand that he attempted to meet through Lemon Tree. Compared to other established hotel groups, his 15 year old brainchild may be a new entrant in the Indian hotel industry, but it is a category creator and a first mover. Keswani focused on building a coherent hotel brand in India and ended up building the only hotel company in the world that operated from land (essential raw material) to guest (final consumer). What started as a small hotel in 2002 grew into a chain of 40 hotels in 23 major cities of India by 2016. Despite the Indian hotel industry turning sick after the global financial crisis in 2007-08, Lemon Tree continued to grow at 45% every year in physical supply. Between 2017 and 2025, Keswani planned to expand his hotel business by opening resorts, extending the Lemon Tree brand, expanding operations in the lesser developed parts of India, and building residential apartments. Interestingly, with so much happening this company had not spent a single rupee in advertising or marketing till 2016. But as times changed, so did Lemon Tree’s existing paradigms and strategies. In 2012, Lemon Tree modified its fully integrated model by splitting the value chain and partnering with international investors and domestic players at different points in the value chain. Lemon Tree’s success was primarily due to value chain integration and yet they planned to disintegrate fully in the future and move more into hotel management than ownership. Was that the right strategy for the day?