GLOBAL REPORT—The hotel building boom is officially underway in India, as evidenced by a spate of recent development announcements from the major brands.
Their interest is not without reason. There are only 167,806 hotel rooms in the country, according to STR Global, sister company of HotelNewsNow.com. Las Vegas, by comparison, boasts 168,856.
And with a population of more than 1.17 billion, according to the World Bank—a tally comprising a burgeoning middle-class citizenry who for the first time in the country’s history have the disposal income needed for domestic travel—India is geared to sustain development for the foreseeable future.
But one size doesn’t fit all when it comes to the brands’ approach to this expansive free for all. To lend some clarity to the building frenzy, HotelNewsNow.com checked in with seven global hotel brands that announced recent development plans in India for a snapshot of current conditions and future plans.
Best Western International
Phoenix-based Best Western International recently announced plans to open 66 new properties in India by 2016, with an emphasis on the 3- and 4-star segments; 30% of the new properties will be Best Western Plus and 20% will be Best Western Premier, according to David Kong, president and CEO of the hotel membership company.
“India is among the top three countries Best Western International is focusing on right now for expansion,” he said. “We’ve done extensive analysis, and India ranks near the top when you look at (gross domestic product) growth, population, technology, Internet penetration, levels of ed ucation, demand and airline lift.”
There’s also potential for a significant increase in corporate travel, as companies are anxious to tap into the country’s well-educated populous, Kong said.
“Because of the impressive GDP growth in India over the past few years, there is a large influx of foreign capital into the country. It creates a very attractive market for corporate travel,” he added.
Leisure travel represents a significant opportunity as well, Kong said. “India has so much to offer travelers in terms of landscapes, attractions, historical sites and amazing cultural destinations. Plus there are emerging possibilities in rural tourism, health-related tourism and much more.”
The biggest challenge to expansion for Best Western is people, Kong said.
“Because most workers have not experienced staying at a hotel, they may find it difficult to relate to brand standards especially in the area of cleanliness and upkeep,” he said.
Choice Hotels International
After requiring the rights to its brands in India in 2010, Silver Spring, Maryland-based Choice Hotels International kicked development into high gear in order to tap into India’s middle class—a group that will grow at an accelerated pace during the next decade, said Mark Pearce, senior VP of the company’s international division.
Company management views its Comfort and Quality brands as the best fit for the country, Pearce said. “These brands are positioned in midscale segment, which is where we see the most potential for demand generation.”
The greatest challenge to developing its brands in India? It’s hard to choose just one, Pearce said. Land costs, for one, are very high, and the financing market is evolving as interest rates are high and repayment periods are short. Further complicating matters is the complex approval process that results in an extended development cycle, he added.
“All of these factors need to be considered as we develop a viable growth strategy for the Choice brands,” Pearce said.
After opening six hotels in India during 2011, McLean, Virginia-based Hilton Worldwide has its sights set on another 14 by year end and 50 properties within five years, according to Rajesh Punjabi, the company’s VP of development in the country.
The primary focus will be on the Hilton’s full-service brands, Hilton and DoubleTree, as well as its mid-market, focused-service Hilton Garden Inn and Hampton. However, the company also plans to introduce its luxury Conrad and Waldorf Astoria brands in the market.
“According to data available, currently India has approximately 166,800 hotel rooms, 58,300 of which are branded,” he said. “Another 60,000 hotel rooms are expected to be added to the inventory in the next four to five years. Meanwhile, there are 740 million domestic travelers in the country presently. This is anticipated to increase to 1.5 billion by 2020. By that time, foreign tourist arrivals are expected to increase from the current 5.5 million to 10 million to 11 million. Given, these fundamentals and based on what we have experienced in other regions around the world, despite the additional inventory, demand will significantly outstrip supply,” he said.
Punjabi said the cost of land, cost of debt financing and the scarcity of trained manpower are three of the highest hurdles to development in the country.
Hyatt Hotels Corporation
“One of our priorities in India is to create brand preference through increased distribution. Three of our brands—Hyatt Regency, Grand Hyatt and Park Hyatt—already operate in this market, with Hyatt, Hyatt Place and Hyatt House entering the market shortly,” said Ratnesh Verma, senior VP of acquisitions and development for Hyatt Hotels & Resorts in Asia.
The latter two in particular will serve as primary growth drivers for the Chicago-based company.
“The Hyatt Place and Hyatt House brands will expand in presence to meet the needs of increasing numbers of domestic travelers in India, where we believe there is a substantial and very rapidly growing market for service offerings that meet the lifestyle needs of both busy business travelers and families in both the casual-hospitality and extended-stay sector,” Verma said.
The company is targeting growth in second- and third-tier cities where domestic business travel is increasing.
Hyatt also plans to leverage existing relationships with local developers—a crucial necessity to navigate the complex web of permits and licenses required in building hotels.
“We’ve operated in India for nearly 30 years and built great relationships (there),” Verma said. “We look forward to renewing our focus on growing opportunities with our existing development partners, as well as attracting new partners through the leadership of our India development team.”
InterContinental Hotels Group
Denham, England-based InterContinental Hotels Group is driving growth in India across four brands: InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts and Holiday Inn Express.
Holiday Inn Express, the brand most recently introduced in the country, received a kick start last year when the group signed a joint venture partnership with Duet India Hotels Group to develop 19 new properties across 12 cities in India. IHG has a 24% equity stake representing a multiyear investment of US$30 million in the partnership.
Both Holiday Inn brands represent more than 75% of IHG’s pipeline in India.
“With strong economic growth and an expanding middle class, the midmarket hotel space in India offers a compelling investment proposition, which is why we entered the joint venture partnership with Duet India Hotels Group,” said Chris Moloney, VP of operations, South West Asia.
He pointed to the country’s booming tourism industry, which saw more than 740 million domestic trips taken during 2011 alone, as one particularly enticing area of opportunity for the group.
While there remains no challenges on the demand front, Moloney cited the country’s extended development process as a hindrance; it takes an average of 43 months from contract signing to opening, he said.
“Some of the contributing factors are building technology, funding constraints and approvals,” he added. “Hotel projects are especially complex in India because of the multitude of approvals and permissions that are required—this significantly adds to the timescales on a project.”
IHG is on track to have 150 hotels in India by 2020.
Starwood Hotels & Resorts Worldwide
Stamford, Connecticut-based Starwood Hotels & Resorts Worldwide plans to open 20 hotels in India by 2015, according to a news release.
Doubling portfolio growth in India is the proliferation of Starwood’s Aloft and Four Points by Sheraton brands. Aloft recently doubled its footprint in India with the opening of Aloft Coimbatore and will continue its rapid growth with new hotels opening in Ahmedabad and Chandigarh. Four Points by Sheraton will add two new hotels in the next two years.
During 2012, Starwood will continue its growth momentum from the luxury tier with the opening of ITC Grand Chola, a Luxury Collection Hotel, Chennai; Westin Chennai Velachery; and ITC Rajputana, a Luxury Collection Hotel, Jaipur.
Wyndham Hotels Group
2011 was a year of “firsts” in India for the Parsippany, New Jersey-based Wyndham Hotels Group. The company opened its first Days Inn and Dream hotels in India, signed its first Ramada Encore and recently opened its first Wyndham near the Taj Mahal, said Ken Greene, the group’s president and managing director in the Asia/Pacific region.
“Our strategy is the same in India as it is in most places in the world. We want to be where every customer wants to be,” he said.
But unlike other places in the world—particularly China, which shares India’s emerging-market mentality and tremendous opportunity for growth—developing a property in India is a different story entirely, Greene said.
“India is probably the toughest place in the world to do business, particularly on the hotel side,” he said. Any given project requires between 200 and 300 permits and licenses, land costs are exceptionally high (as much as 50% of total project value) and each market or region has its own bureaucratic wrinkles.
With so much complexity, Greene said the biggest challenge is finding a seasoned, local developer with whom to partner. “We’ve had some wonderful … developers affiliate with our brands,” he added.
Looking ahead, Greene said Wyndham will have a “very healthy footprint across all segments. We will have seen pretty good growth in the Wyndham brand in really upper tier marketplaces. We’ll see Ramada continue to strengthen and continue to grow.”
Wyndham in January signed a nonexclusive development agreement with Unique Mercantile India Private Limited to launch its Howard Johnson brand in India with 35 new properties representing 3,000 rooms by 2017.
Login or enter a name
Post Your Comment
Check to follow this thread via email alerts (must be logged in)
(4000 characters max)
Comments that include links or URLs will be removed to avoid instances of spam.
Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site.
You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies.
Please report any violations to our editorial staff