Home / News / India /  How luxe hotels pivoted to serve wealthy visitors

New Delhi: Roughly 100 kms from the city of Indore in Madhya Pradesh is a relatively little-known place called Maheshwar, which is popular for its exquisite sarees. Many Indians who chanced upon this location last year weren’t visiting to indulge in a shopping spree, however. As the pandemic shut down access to the rest of the world, domestic travellers —mostly high-net-worth Indians (HNIs)—made a beeline towards Maheshwar’s plush 250-year-old fort, Ahilya, which is set on the banks of the Narmada River.

The fort—now a hotel—promised tourists a trail into the nearby deserted city of Mandu and the famed island temple of Omkareshwar, closer still.

Many Indians didn’t even know about the existence of such hotels until the pandemic struck. For a slew of hospitality businesses that hold small inventory (number of rooms), rely on personalized experience and charge high room rates (sometimes upwards of $800-1000 a night), the only way to survive the pandemic was to go after ultra-high net worth Indians (UHNIs).

And for many like the owners of the 18th century Ahilya Fort Hotel, the gamble did pay off—even if it meant tweaking their business models quite a bit and taking a haircut on prices. The goal was to tap into the wallets of well-heeled domestic travellers who sought out experiences that took care of safety and social distancing norms.

Pre-covid, domestic hotels would have found it hard to believe that Indians would someday be willing to pay 30,000-50,000 a night to stay at a small boutique property, especially one that did not even have the tag of a 5-star hotel.

But the pandemic has changed those pre-existing notions, opening up a whole new travel segment. A brand new business model has emerged overnight. Many hotel companies began to consciously target Indian travelers via social media channels like Instagram. Some even used LinkedIn to reach out to a “filtered" HNI and UHNI audience. Niche firms like LuxuryEscapes and Voyaah—online travel agencies—also got into the act.

Yeshwant Holkar, the operating partner at Ahilya Experiences, said the pandemic has turbocharged the Indian customer. From being just 30% of its clientele about five years ago, they now account for 100% of all bookings. Of course, part of the reason is that in-bound tourism is as good as non-existent at the moment.

“But the trend, it’s quite clear. India is an incredible country and the infrastructure is now also doing justice to travel," Holkar said. “We are giving world-class experiences. Of course, Indians are going to want to explore India. This is here to stay," he added. The Ahilya By The Sea Goa property is affiliated with Relais & Châteaux, an association of individually-owned and operated luxury hotels across the world.

India first model

Many other smaller hotel companies have also jumped very quickly onto the bandwagon and have been gaining from a windfall of domestic travellers. The idea was to better suit their offerings to meet the Indian customer’s demand.

Indian chain, The Postcard Hotel, began operations in 2018 with the idea of setting up as an “India first" brand. So, it had no problem fitting into the scheme of things when the pandemic happened.

Kapil Chopra, director at Untitled Hotels & Resorts, the company that runs The Postcard Hotel, said there are 18 billion trips that happen in India annually via flight, train and bus journeys. Even if 1% of these trips are in the luxury segment, there are 18 million luxury trips in India to take advantage of, he said.

“When covid restrictions were lifted, all our resorts were full as there was immense inherent demand within India for a luxury experience. Surprisingly, none of the large hotel companies have built an “India first" model and instead have been built for foreign inbound travellers," Chopra said. Postcard’s rooms range upwards of 20,000 a night in most locations. It is present in locations like Gir Wildlife Forest, Goa, Kochi, etc.

Chopra says many major hospitality companies have also now started focusing on the domestic segment in a big way in recent months. In July this year, hotels-to-cigarettes major ITC launched ‘Storii’, a collection of intimate-sized boutique lifestyle properties in the upscale segment for experiential holidays. The Indian Hotels Company Limited-run amã Stays & Trails, which was launched in 2019, is a branded homestay portfolio with about 50 bungalows at locations ranging from Alibaug, Jodhpur, Kolkata and Lonavala to Mahabaleshwar.

Chopra added that there is still room for different hotel companies to grow and change the narrative of what constitutes a travel experience. “Even in familiar destinations like Kochi and Goa, we have brought in a different narrative on how one sees and experiences the city. For many years, European countries like France and Italy have done a great job of promoting their culture, traditions and their diversity. It is now time for India to do the same," he added.

For many boutique brands like Postcard, bookings in 2021 are outpacing 2019—for a major part of the year at least. Even in off-peak months, the chain’s Goa hotels have been sold out.

Luxury boutique hotels are typically small properties with less than 60 keys (keys refer to rooms in hotel terminology), and their USP is the personalized service and ‘elevated experience’ that they tend to provide guests. The differentiated experience is often a result of several aspects, such as the property’s location, design, architecture or even specially curated themes or events that provide guests with unique stories and memories.

Several palaces and havelis in Rajasthan, for instance, have become iconic boutique hotels and resorts that not only generate demand for themselves but also help to establish a ‘brand’ for the destination itself, said Mandeep S. Lamba, president of South Asia hospitality consultancy, HVS.

India has about 150,000 branded hotel rooms, which are managed by several international and Indian players like Marriott, Taj, ITC, Lemon Tree Hotels, etc. However, boutique and independent hotels are not usually mapped in that data as they do not technically fall into any star category.

Luxury travel boom

Amanbagh by Aman Resorts in Ajabgarh, a nine-year-old super-premium hotel situated near Sariska in Rajasthan, has never attempted to capture the attention of the Indian traveller.

Roland Fasel, chief operating officer at the Swiss-headquartered resort firm, said: “In numerous ways, qualities such as generosity of space and efforts to slow down time have always been firmly ingrained in our DNA. Now, (these aspects are) more desirable to travellers than ever."

From 2019, there has been a definite surge for online tour operator MakeMyTrip in the alternative stay/expensive room segment (upwards of 6,000-8,000 a night). The share of this segment in overall bookings has shot up from the earlier 2-3% to high single-digits now.

“Even properties where a long weekend slot might (cost) 25,000 a night has also grown," said Rajesh Magow, Group CEO, “In fact, this is one segment where we are already doing volumes of more than 120-130% (compared to pre-pandemic levels)."

Amanbagh’s Fasel said, “We have seen, over the last 18-months, an increase in demand for private travel. This is something we continue to see with enquiries and bookings for our private villas across India. We have noticed that people are still travelling in bubbles or pods. And since our service is intuitive, and our experiences can be completely customized, we can cater to any guest’s notion of ‘luxury’."

Vinutaa S, assistant vice president and sector head, ICRA, an investment information and credit rating agency, said the upswing in consumer demand in recent months has resulted in a pick up in occupancies as well as average room rates (ARRs). Some premium hotels, especially at leisure destinations, have even witnessed ARRs go back to pre-covid levels.

But the larger picture is still bleak for the hospitality industry. Unlike small boutique hotels, the bigger hotel chains did suffer. On a pan-India basis, ARRs still remain at a 20-25% discount to pre-covid levels as international and business travel is yet to come back in a meaningful manner. Thus, the demand recovery pattern has been mixed.

Properties affiliated with strong brands which are located in relatively less-crowded areas/have a lower number of rooms, and which happen to be in the luxury segment, have come out of the pandemic in the pink of health.

But the hopes of almost everyone affiliated with the travel business is, for now, squarely pinned on the domestic tourist. “Call it pent-up demand or (a) lack of options, covid has led to incredible India being explored again," said Syed Junaid Altaf, managing director, Empyrean Skyview Projects, which runs several resorts in Jammu. “Integrated resorts will look towards domestic tourism for the next 3-5 years (at least). That’ll be the big driver," he added.

Skyview’s resort has about 25 keys. Even hotel brands like The Khyber Himalayan Resort & Spa, Gulmarg, have been seeing full occupancies since domestic travel reopened in between the two covid waves.

The effect on prices

Gurugram-based RAREIndia, a leisure travel company that amalgamates small, private and niche concept hotels, has seen its partners change their business models almost overnight to meet the needs of the Indian clientele.

RAREIndia’s founder partner, Shoba Mohan, said hotels (those with which the firm is associated with) that had easier access to airports and were more drivable from cities did far better than others. Almost all the hotels in RAREIndia’s roster —102 of them, of which 93 are in India— had to bring down the pricing to about 60% of pre-covid levels in order to better suit the Indian traveller.

Many of these hotels were designed to cater to international tourists from countries like the UK. The erstwhile all-inclusive packages included offerings like safaris and birding. “The hotels realized pretty quickly that they were not going to be selling at the values (that) they were holding on to before the pandemic. The prices of some of these were as high as 50,000 a night," Mohan said.

She added that after slashing prices, properties like the Karan Mahal in Kashmir—the erstwhile estate of the royal family of Jammu and Kashmir—did very well, as there was an opportunity for the UHNI and HNI travellers to buy out the entire small inventory property for a few days.

There were also those hotels that did suffer due to the price cuts. Despite the cut, hotels registered only 40-60% occupancy and, overall, the revenues were down 25-40%. “But it helped them sustain their businesses, and that was important," Mohan said.

Things have now come a full circle. After the prolonged slump, room rates in some locations are increasing across the board. Akhil Arora, chief operating officer, Espire Hospitality, which owns plush resorts like the Six Senses in Sawai Madhopur, said they are witnessing a 15-18% uptick in average rates across all their resorts. This average room rate increase is accentuated over the weekends to the tune of 24-26%.

Mohan of RAREIndia said that going forward, the domestic-foreigner skew is likely to balance out. “Some of these hotels used to be at 90:10 (international vs. domestic customers). Sometimes, even 100%. That is a very dicey way to do business. For people who are not heavily reliant on inbound marketing, this ratio will probably balance out to a 50:50 fit."

Lamba of HVS added that there is a significant untapped growth potential for the luxury boutique segment in India. “In many under-served markets in the country, developing a boutique resort will be a good value proposition due to the requirement of smaller land parcels. These types of hotels are also more ‘agile’ as compared to larger properties in providing customized and personalized services," he said.

Avijit Singh of House of Rohet, which manages multiple properties in and around Jodhpur like Mihir Garh in Rajasthan, said: “The hard work we’ve done to tap into the domestic tourist market won’t just evaporate after the international guests come back. Some people will naturally go abroad once the borders open up fully. But I do not think that the foreign market will come at the cost of the domestic market (any longer). It’s here to stay."

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