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Last year, Kempinski and Hotel Leelaventure Ltd, which runs the Leela Palaces, Hotels and Resorts, ended a 25-year marketing alliance. Photo: Pradeep Gaur/Mint
Last year, Kempinski and Hotel Leelaventure Ltd, which runs the Leela Palaces, Hotels and Resorts, ended a 25-year marketing alliance. Photo: Pradeep Gaur/Mint

Kempinski looking to open new hotels in India

Kempinski currently operates only one hotel in India, in Delhi, on its own

Mumbai: European luxury hotel chain Kempinski Hotels SA is looking to expand its presence in India and is in advanced negotiations for opening properties in Mumbai and Hyderabad, said a top official of the company.

“Kempinski is also considering opening a resort in either Goa or Kerala," said Maria Kuhn, vice president, public relations, Kempsinski. However, she declined to comment on when the next Kempinski hotel in India would open.

Kempinski currently operates only one hotel in India—in Delhi—on its own. Last year, Kempinski and Hotel Leelaventure Ltd, which runs the Leela Palaces, Hotels and Resorts, ended a 25-year marketing alliance.

“Right now the business climate is very positive in India with the new government. India is a country that does need more hotels and also we think that the market has matured now," said Kuhn.

“Indians have a lot of disposable income and they don’t mind spending on good quality accommodation," she added.

According to the report “Hotels In India: Trends and Opportunities" released in September by HVS, a hospitality consulting firm, branded/organised hotel room supply has grown at a compounded annual average rate of 17.8% over the past five years, while demand for these rooms grew at 17.6% for the same period. As a result, India-wide occupancies increased from 59.3% in fiscal 2012 to 57.8% in fiscal 2013 and 58.9% in fiscal 2014. “While occupancies have remained range-bound, average rates have declined for several years in a row," said Achin Khanna, managing director, consulting and valuation, HVS South Asia.

“The hotel company is looking for new properties through the management contract route," Kuhn said.

“We are a management company and we do not own our hotels. Out of the 74 properties that we have globally, only two are owned, which are in Germany," she said.

Management contracts have become an industry standard, with more and more companies going into the management side as it helps diversify the risks, she added.

The company is looking for a local partner for its India operations as the company believes that with all the regulations and laws in India it is difficult for a foreign hotel company to operate on its own.

Most international hotel chains such as Starwood Hotels and Resorts Worldwide Inc. and Marriott International Inc. are present in India through several brands across several categories. Kempinski, however, is globally present in only the 5 star luxury category and their plan for India is no different.

“We don’t do this diversification into different segments. However, we do adapt the hotels to the local markets, like our Delhi property is more of a MICE (Meetings, Incentives, Conferencing, Exhibitions) hotel," Kuhn said.

However, Kempinski is not looking to expand exponentially in India—unlike other international chains—and has not fixed a target for the number of hotels. “We believe that anything that becomes mass market, say if you put 300 hotels, you cannot claim that you are luxury. Luxury is limited. That is a very clear proposition, which separates us from other hotel companies," said Kuhn.

“The luxury space in the Indian market already has a fair amount of competition with both Indian and international hotel companies present here. However, the good thing for this segment is that most of the new upcoming supply is in the upscale and midscale segments, so oversupply will not be a problem in this space. However, Kempinski will face significant competition from hotels in upper upscale and upscale segments, which also offer full service but at relatively lower prices," said Khanna.

“Apart from India, Kempinski is also looking to expand to new and under-penetrated markets like Ghana, Cuba and Myanmar," said Kuhn.

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