New Delhi: Hospitality companies are targeting the so-called super luxury segment in India to tap the country’s growing number of high networth individuals and companies that are willing to pay for premium rooms after the mid-market expansion drive of the last two-three years.
A recent report on the hospitality sector by credit rating company Icra Ltd said there has been a spurt of activity in the super luxury segment, apart from the rise in supply of mid-market hotels.
“While over 50% of the incremental supply (of about 60,000 rooms) is coming under midmarket brands such as Aloft, Holiday Inn, Quality Inn, Ramada, among others, another niche segment which is emerging is the super luxury property,” said a recent report by Icra.
“St. Regis from Starwood, an uber-luxury product, is set to be launched in Noida (in the National Capital Region) by 2015. Other hoteliers in the pipeline include Mandarin Oriental, Lebua, MGM and Jumeirah.”
Analysts said hospitality companies are now focusing on India’s high networth individuals (HNIs), and HNIs on their way to overseas destinations besides inbound travellers.
“Over the last three to four years we have seen movement in the luxury space from several global companies,” said Pavethra Ponniah, a hospitality analyst at Icra. “There is a target market in India for the luxury properties both for local HNIs as well as higher-end tourists and business travellers to India. Also, the relatively high land cost tends to make luxury properties more viable.”
Super luxury properties which will come up this financial year include the Fairmont in Jaipur, the Kempinski in Delhi and the Leela Chennai. Fairmont Hotels and Resorts has plans to set up seven properties in India by 2015. A luxury room at the Fairmont would start at about Rs 28,000 while villas can go up to Rs 3.5 lakh a night.
According to the Icra report, the super luxury properties that will come up in the next few years will have tariffs well in excess of $1,000 (around Rs 55,000 today) a night and provide highly customized services, with personalized butlers, chefs, luxury transportation and individual food and consumable (bed linen/toiletries) preferences.
Kempinski Hotels S.A., a European luxury hospitality brand that has a property in Gurgaon in partnership with Leela Palaces, Hotels and Resorts, is looking at five properties in India.
“The way India is progressing, the luxury segment is not going to go away,” said Vella Ramaswamy, general manager of the Kempinski hotel that’s being set up in East Delhi. “India has already reached that level.”
With rapid urbanization, there is demand for super luxury properties, Ramaswamy said.
“We are looking at five properties in the top luxury segment in India by 2015, including the existing Leela Kempinski,” he said. “All other properties will be independent and each of these properties will entail initial investment in excess of Rs 1,500 crore.”
Hoteliers said luxury brands are exploring more opportunities in India than ever before.
“Not only is there more movement in the luxury segment in India, luxury properties are now spread across India,” said Atul Lall, general manager, Fairmont Jaipur. “Earlier there were luxury hotels in metro cities only but now many such properties are coming up in places like Kerala, Jodhpur, Jaipur and Goa.”
Even though the outlook for the Indian hospitality industry doesn’t look good with increasing pricing pressure on margins for the next two quarters, according to the Icra report, industry analysts said the companies are still positive about the long-term outlook and are thus betting on luxury properties, which have a long gestation period and carry more weight than four-five mid-market segment properties in terms of mileage and marketing.
“Over a longer time frame, the Indian market, being relatively under penetrated, remains attractive. The slowdown in investments in China has also contributed to this trend,” said Ponniah.
India’s luxury hospitality segment is still evolving, said James A. Kaplan, senior vice-president for development, Asia-Pacific and India, Fairmont Raffles Hotels International.
“As the economy grows, and tourism infrastructure improves, an increasing number of domestic travellers will move to upper, upscale and luxury, which will augment the projected new international leisure and business travellers,” said Kaplan. “Relaxation of visa rules and process will further stimulate international arrivals, as to a great extent, compared with other countries, this market (luxury hospitality) remains largely untapped.”