Global brands queue up to open more hotels in India4 min read . Updated: 24 May 2010, 11:06 PM IST
Global brands queue up to open more hotels in India
Global brands queue up to open more hotels in India
New Delhi: Global hotel groups are persisting with their push into India, encouraged by the resilience of its economy and the shortage of hotel rooms in a country growing at the quickest pace worldwide after China.
Canada-based Fairmont Raffles Hotels International, Thailand’s Amari Group, Luxe Worldwide Hotels, Zurich-headquartered Mövenpick Hotels and Resorts, and luxury hotel brand Waldorf Astoria Hotels and Resorts all have plans to enter or extend their business in India through the addition of five-star properties.
The country’s hospitality business needs investments of Rs60,000 crore over the next five years to meet the unmet demand of 150,000 rooms, according to a January study by the Federation of Indian Chambers of Commerce and Industry and Evalueserve.
“In India, there is a market for all players," said Kaushik Vardharajan, executive director of HVS Global Hospitality Services, a hotel consultancy firm. “The country still needs a lot of rooms."
While most companies are looking at management contracts, which involve running hotels without any equity investment, some such as Luxe, which runs about 200 luxury boutique hotels, and Mövenpick are seeking acquisitions to gain a quick entry.
According to estimates by HVS, around 95,000 rooms are expected to be added in India over the next five years, with half in the mid-market and budget category, and the rest in the luxury segment.
Hilton Worldwide is in the process of introducing six of its brands into the country—Waldorf Astoria, Conrad, Hilton, DoubleTree, Hilton Garden Inn and Hampton.
Waldorf Astoria is looking at signing up two hotels in the country in the next three-five months.
Fairmont Raffles, majority owned by an affiliate of Qatar’s sovereign wealth fund, is targeting 15-20 hotels over the next three years. The first of these—a Swissôtel in Kolkata—is set to be launched next month and is being developed by Harsh Neotia’s Ambuja Realty.
It will open two Fairmonts— its luxury brand—in Jaipur and Hyderabad over the next two years, as part of plans to open 20 hotels in eight years.
“With the backing of the Qatar government, we are looking to expand aggressively around the world and India is one of the destinations we want to tap into," he said.
The group is looking at opportunities in Mumbai and Delhi for its Raffles brand, besides Fairmont hotels in Jaipur, Hyderabad and Bangalore, apart from a resort in Goa.
“The hotel rooms inventory in India is very small keeping in mind the potential of this large country and the rate at which tourism is expected to grow in the next decade," said Mandeep Lamba, managing director and chief executive of Onyx Hospitality India Pvt. Ltd, which is bringing the Amari Group to India.
Apart from overseas visitors, domestic demand is also expected to rise, given economic growth and changes in lifestyle.
More rooms may lead to an easing of rents, which will make India more popular, Jaffer said. “Although some correction in long-term tariffs is bound to take place, this will only make the destination more affordable and attractive," he added.
Tariffs rose to levels higher than some developed markets before the global financial crisis, for instance in Bangalore, rents climbed to $600 (Rs28,000) a night, higher than comparable rooms in Paris.
Those “rates were unsustainable. However, that is not the case now", Jaffer said. “In five years, the room supply will double in India. But in my opinion, there will be demand-induced capacity like it happened in the case of Singapore if India improves its infrastructure and takes other measures like relaxing the visa norms, etc."
Amari is looking at introducing freshly launched brands Saffron and Ozo. The first is positioned at the top-end of the luxury market and the second is a boutique mid-scale brand.
The company is in discussions with several parties to manage properties and is expected to announce its first tie-up soon. It wants to have seven properties by 2017, along with another seven at various stages of completion.
While interest in the premium category has not waned amid the rush of mid-scale and budget category hospitality companies into India, the downturn has made premium hotel brands cautious about location.
Acquisition targets are not always easy to find in India’s biggest cities as Luxe Hotels has discovered. The company is looking for properties in Mumbai, New Delhi, Kolkata and Hyderabad, “which is a challenge", said Kishore Luthria, regional director (India). It has signed up one hotel in Bangalore—Mark Boulevard in Whitefield, which is already operational—and has two greenfield properties coming up in Chennai and Alibaug in Maharashtra.
Though the group operates on a franchise model, providing marketing and sales support without management or investment, it may consider the acquisition of a hotel chain to fill the gap.
“Any chain with good quality properties, which has a presence in key locations, will be a good buy," Luthria said. It has set aside Rs100 crore for its Indian plans, “a fund that could also go up as and when required". Luxe is in the process of signing up 14 hotels.
Mövenpick is also looking at potential acquisition targets, which “could hoist the brand flag in the country in one go", said Lokesh Kumar, vice-president (development and marketing), India. “Either we will acquire a majority stake in a hotel or will go for a greenfield project as it is very difficult to bring changes in an existing property."
A hotel project typically takes 30-36 months to complete.
The company has one hotel coming up in Bangalore, which is a 182-room property on a management contract, and is in advanced discussions for hotels in Gurgaon, south Mumbai, Jaipur, Kolkata, Hyderabad and Goa.