Mumbai: Hotel chain operator Royal Orchid Hotels Ltd plans to add a new brand in the Indian mid-market space in the next couple of months, joining a growing list of hoteliers keen to expand portfolio for the cost-conscious Indian consumer.
“As things emerge, we will be adding categories of hotels so we are planning to add a couple of new brands. These will be in the mid-market space,” managing director Chender Baljee said in an interview. “In the five-star segment we have the Royal Orchid brand, in four-star, Royal Orchid Central, and maybe a notch below that we are planning to put another brand,” Baljee said, adding a new brand is likely to be launched in the next two months.
Earlier this year, rival premium chains Indian Hotels which operates the Taj and Vivanta properties, and Hotel Leela have also announced plans to expand into the mid-market segment as their luxury offering face increasing competition from foreign chains such as Marriott International, Starwood Hotels and Intercontinental.
“They definitely have an advantage in the higher brand category in the metros,” Baljee said, referring to the foreign competitors. “The clientele also is driven by the foreign brands. But in the smaller markets domestic players do have a very good chance of competing with them because the market itself is developing.”
He said despite a slowdown in the United States (US) and Europe, the domestic demand for the hospitality industry was still going strong and the group will go ahead with its expansion plans. “There is a lag between what happens at European markets and what happens here. But there is a lot of domestic demand here, so we do not expect that much of an impact,” Baljee said.
The Bangalore-based group operates 18 business and leisure hotels across 11 destinations including Bangalore, Pune, Jaipur and Mysore, according to its website. The firm has hotels coming up in Delhi, Hyderabad, Mumbai and Chennai among others, and plans to add over 700 rooms across the country this fiscal, Baljee said.
“We are going ahead full-fledged on our hotel expansion. The expansion cannot be stopped just because there is a blip in the market”.
With the exception of the Hyderabad property in which the company has invested more than Rs 200 crore, most of the other upcoming properties will be under management contracts with developers.
Royal Orchid has a board approval in place to raise about Rs 100 crore through a qualified institutional placement, but the firm will wait for market conditions to improve before launching a share sale.
India’s benchmark Bombay Stock Exchange (BSE) index has dropped about 17% since the beginning of the year as investor sentiment took a hit in the wake of the global economic slowdown.
Baljee also said the firm plans to expand overseas in the Tanzania market once its India expansion is complete. “We are already planning Tanzania but we thought let the market stabilize here and let’s finish up all our expansion here. We have taken up land there. We will probably look at it sometime next year,” he said.
At 3:24 pm, Royal Orchid shares were trading down 0.18% at Rs 55.35 in a choppy Mumbai market.