Mumbai: A string of global hotel chains plan to enter India and some that are already present in the country want to expand, betting that a shortage of hotel rooms in the country offers business potential going beyond the current slowdown in Asia’s third largest economy.
Switzerland’s Movenpick Hotels and Resorts and Swissotel Hotels and Resorts, Berggruen Hotels of New York, Hong Kong’s Shama Group, Jumeirah Llc of the United Arab Emirates and Sant Chatwal-promoted Hampshire Hotels and Resorts Llc are among the chains that are set to come to India.
Corinthia Hotels group from Europe, Langham Hotels International from Hong Kong and MGM Mirage Hospitality group of the US are also looking at starting hotels in India, said Manav Thadani, managing director of consulting firm HVS.
India calls: A Movenpick hotel in Thailand. The chain is one of the many set to come to India.
Existing chains are, meanwhile, going ahead with expansion plans. For instance, Accor Hospitality group of France will introduce its Formula 1 brand and Chicago-headquartered Global Hyatt Corp. its Hyatt Place brand.
“The reason for this enthusiasm is simple: India needs an additional 150,000 rooms. Out of this, 100,000 should be budget rooms,” tourism secretary Sujit Banerjee said on the sidelines of the 5th Hotel Investment Conference in Mumbai on Wednesday.
The government has forecast 7.1% economic growth in the year that ended 31 March—the slowest pace in six years—as the US, Europe and Japan battle recession in the wake of last year’s global financial turmoil. That’s caused vacancies at Indian hotels to rise, eroding the revenue of hotel companies.
India’s potential outweighs the temporary downturn.
“Serious hotel companies are here to stay as India is still facing huge shortage of rooms except in select locations. Real estate developers (that) are keen to pocket quick money may not be there in the scene,” said Subramani Sundaresh, director and asset management head of Infinite India Investment Management, a private equity firm that invests in hospitality projects.
According to data from HVS, international and domestic hotel chains had announced in August that they would build at least 114,000 rooms in India; and actual construction is under way for 47,000 rooms. So, all plans are not always translating into action immediately.
During the boom years, leading listed real estate firms had announced hotel projects in the country, but dropped them as realty prices crashed and the cost of borrowings increased steeply last year.
“It will take five to six years to build a hotel and most of the hotels are built in difficult times. If you want to wait (for) the economy to turn around, you will miss another cycle of economic boom,” said HVS’ Thadani. Sant Chatwal, chairman and chief executive of Hampshire Hotels, said a slowdown presents an opportunity as the cost of development and construction is lower.
Chatwal plans to invest Rs5,000 crore by 2012-13 in hotel properties in Kochi, Mumbai, Bangalore, Jaipur, Kolkata and Hyderabad.
Hampshire Hotels is launching its Dream chain of hotels in India. The first one, in Kochi, will be launched later this week. “The Dream of Kochi will be the third Dream hotel in the world after New York and Bangkok (and will be) followed shortly by Miami,” Chatwal told Mint last week.
Jean Gabriel Peres, president and CEO of Movenpick, said his company wants to manage 15 hotels in India by 2015. “These hotels will be upscale hotels and the first would be in Bangalore. There is no big investment involved since we are into managing hotels, not building those,” he said, without giving more details.
Meinhard Huck, president of Swissotel Hotels, said, “there are some deals getting finalized in India”.
Shama of Hong Kong will start service apartments in Bangalore by November. “This will be an upscale hotel with 136 rooms. We are also looking at cities such as Delhi, Mumbai, Gurgaon, Hyderabad, Kolkata and Chennai,” said Raymond Wan, an analyst with Shama Management Ltd.
Berggruen Hotels will have five mid-market hotels under the KEYS brand up and running later this year in Khandala, Mahabaleshwar (both in Maharashtra), Thiruvananthapuram, Ludhiana and Bangalore.
“We had invested around $21 million for these five projects. We are actively pursuing multiple locations in 25 other sites in the country which include Chennai, Hyderabad and Delhi/NCR, among others. We will operate 38 hotels evenly distributed across tier I, II and III locations pan-India, each with 100-170 rooms,” said Sanjay Sethi, CEO and managing director, Berggruen Hotels.
Accor has also announced plans to expand its network in India, with 48 committed hotel developments that will add 9,980 rooms. The hotels will be a mix of Accor brands—Sofitel, Pullman, Novotel, Ibis, Mercure and Formula 1. Four sites have been decided for the last, to add 425 rooms. Accor will also manage three convention centres across the country.